Economy & Business

Who’s Afraid of Stephen Moore? And Why?

Stephen Moore at CPAC 2015 (Gage Skidmore)
His challenge to establishment thinking has led to a flurry of name-calling.

In the Middle Ages, guilds held a monopoly on who could work in a whole range of trades, from blacksmith to brewer. The guilds set high hurdles for new entrants, or blocked them entirely, in order to limit competition.

France’s minister of finances Jean-Baptiste Colbert once ordered all French crafts to form guilds “so as to compose by this means a group and organization of capable persons, and close the doors to the ignorant.” But the great free-market economist Adam Smith held a different view of guilds: He called them “a conspiracy against the public.”

The Washington policy guild often operates like a medieval guild in its effort to screen out “ignorant” heretics who hold disruptive ideas. Just look at their hysterical overreaction to President Trump’s appointment of economist Stephen Moore to the Federal Reserve Board, whose primary role is setting the level of interest rates in the economy.

Moore has been a senior economist on the Congressional Joint Economic Committee, served as an economist at the Heritage Foundation, and been a member of the editorial board of the Wall Street Journal, where I got to know him well. He is known for his sunny disposition and ability to work with others.

But to Beltway guild members, he is a member of the hated school of supply-side economics, which holds that economic incentives matter a great deal. Supply-siders assert that tax cuts and sound fiscal policy can help boost the U.S. economy out of the economic doldrums it fell into after the recession of 2008. The supply-side tax cuts of the Reagan administration fueled the booming economy of the 1980s. Trump’s tax cuts have helped ignite a surge in jobs and wages accompanied by a stable, strong dollar.

But to Washington’s policy guild, this record is all the more reason to oppose and belittle Moore. Because Moore has been an architect of President Trump’s policies and authored a book called “Trumponomics,” he can’t be expected to maintain the independence of the Fed, his critics say. He has backed Trump’s 2016 campaign call for the establishment of a monetary commission to look under the Fed’s hood. Yet another sin is that he has called for the Fed to follow a “price rule” that tracks oil and other commodities in setting interest rates. In many ways, it would resemble the rule that Fed chairman Paul Volcker used to tame inflation in the Reagan era. The Fed prefers its own measuring system, which has often led to its own mistakes — such as in the run-up to the 2008 recession. The Fed often makes jarring midcourse corrections: Last December, it planned on raising interest rates twice during 2019. On March 20, the Fed decided there would be no interest hikes at all.

Moore’s response: “Keep the rules stable over time, and you’ll have a stable price system.”

Perhaps worst of all in the eyes of Beltway guild members is that Moore would be an “independent” voice challenging the Fed bureaucracy. He has certainly not kowtowed to it in the past, as so many bankers have. “Donald Trump wanted to drain the swamp. The Fed is the swamp,” Moore has said.

The fear and loathing expressed about Moore is often expressed in ad hominem terms. To journalist Jonathan Chait, writing in New York magazine, Moore is a “famous idiot.” Economist Steven Taylor sneers that “by all appearances, Moore opposes mainstream fiscal theories because he simply doesn’t understand them.” Taylor concludes that Moore “is not an economist, he is an ideologue and a pundit,” because he is not “a trained academic economist” with a Ph.D. in the field.

There we see the guild mentality in full. It turns out that current Fed chairman Jerome Powell also lacks a Ph.D. in economics, and for most of the Fed’s history its chairs were not economists. But Powell is a favorite of the Beltway guild system and so is immune to such criticism.

The notion that having Moore on the Federal Reserve Board will make the Fed recklessly follow Donald Trump’s whims is preposterous. All key Fed decisions are made by a committee of up to twelve members — the seven governors nominated by the White House and five heads of regional Fed banks. Moore would be one voice at the table.

What’s really astonishing about the hysterical reaction to Moore’s appointment to the Fed is how much it reveals the intellectual insecurity and clannishness at the heart of the Washington policy community. Why else would they be so scared of one man challenging their preconceived wisdom?


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