Tweeting on the Federal Reserve, President Trump showed he has some delusional ideas about the economy.
The president claimed on Monday:
….Think of what it could have been if the Fed had gotten it right. Thousands of points higher on the Dow, and GDP in the 4’s or even 5’s. Now they stick, like a stubborn child, when we need rates cuts, & easing, to make up for what other countries are doing against us. Blew it!
— Donald J. Trump (@realDonaldTrump) June 24, 2019
Trump doesn’t realize that U.S. economic institutions serve the national interest. While imperfect, these institutions ensure relative fair dealing and foster significant investor confidence. Applied to America’s massive and diverse marketplace, institutions make the U.S. a profitable place to invest and save. Maintaining that confidence is crucial in maintaining the world’s largest and most dynamic economy and in retaining the U.S. dollar as the world’s reserve currency. Even then, Trump’s argument here is its own worst enemy.
After all, the economy is the keystone by which Trump can hope to be elected. Delivering great rewards across the socioeconomic spectrum, Trump’s economy gives him a moral narrative that he can sell across the political spectrum. Yet, a necessary trade war with China (and a less necessary trade war with the European Union) is restraining investor confidence by cultivating a sense of doubt. Trump’s frantic approach to governing also plays into the doubt issue.
This matters.
If businesses and most investors hate one thing, it’s the condition of sustaining economic doubt. And were Trump to get his way and turn the Federal Reserve into a “MAGA” populist arm of government, the impact would be immediate. Investors would no longer see economic policy as the product of effective balancing between the executive, the legislature, and institutions such as the Federal Reserve, but as the whimsical creation of Trump’s desire in any one moment — a surefire recipe for economic hedging and decline and a recipe for an economy that does Trump very few electoral favors.
Sure, there are legitimate debates over what Federal Reserve policy is best. But we should trust in a more apolitical Federal Reserve to make interest rate decisions in place of partisan politicians. There is nothing conservative about Trump’s tweets on this issue. Nor do they serve his own interests. Trump should refocus his ire. Still not convinced?
Then ask yourself whether you’d like a new principle to be set and interest rate policies to be set under a future President Elizabeth Warren or Bernie Sanders.
