I want to just reinforce what Teddy Kupfer wrote earlier on the importance of an independent Federal Reserve. While others worried about Donald Trump accepting the result of a Hillary Clinton victory, I worried about the problem of Washington’s political class refusing to accept Donald Trump’s victory. I worried that Trump’s challenge to the post-war bipartisan consensus on certain policies would summon a kind of Deep State resistance.
Recent comments by former New York Federal Reserve Bank president Bill Dudley are not reassuring on this score.
Dudley basically argues that Trump’s trade policies, ones he has enacted with delegated authority from Congress, are wrongheaded. And so he advocates a new mandate to add to the Federal Reserve’s mission: thwarting the president’s trade policy, or at least making it more difficult to enact.
Even more stupidly, he argues for casting off the apolitical nature of the Fed in a breathtaking passage:
There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.
Donald Trump has clearly been frustrated at the independent nature of the Federal Reserve while conducting a trade war against an authoritarian rival who can manage his own monetary and fiscal policy much more directly.
Bill Dudley would follow a funhouse-mirror version of this, allowing policymakers to end the trade war unilaterally, if they reject the administration’s trade and fiscal policies.
Effectively, Dudley has called for a reversal of Andrew Jackson’s war against the national bank. Jackson practically extinguished his presidency in trying to destroy the national bank. Dudley’s advice to destroy the Trump presidency, if followed, would potentially have catastrophic consequences for the Federal Reserve. Not to mention our democracy. Thankfully the Federal Reserve has issued a statement resoundingly rejecting it. But the willingness of custodians in our governmental institutions to break precedent to contain Trump is a persistent challenge in our times.