Following last month’s midterm elections, this week’s meeting of the Federal Reserve’s Federal Open Market Committee effectively serves as the first such meeting of the 2024 campaign cycle. With the Fed’s inaction last year exacerbating inflation, and its current round of interest rate hikes likely to slow the economy in the year ahead, Republican presidential candidates should highlight the Federal Reserve Board’s importance by proposing a list of nominees they intend to advance via Senate confirmation for vacant Fed posts if elected.
The pernicious tax imposed by record-high and persistent inflation demonstrates the ways in which monetary policy affects families nationwide. Far from serving as obscure technocrats, appointments to the Federal Reserve rank among a president’s most consequential, with more far-reaching effects on Americans’ lives than some Supreme Court justices. Presidential aspirants should act accordingly.
The next Republican president should pledge to appoint a successor to Jerome Powell, the current Fed chairman, who was appointed by President Trump. Powell, along with President Joe Biden, laid the groundwork for the present economic malaise. By stating in the fall of 2020 that “the risks of overdoing” stimulus “seem to be smaller,” Powell gave carte blanche to Biden and Democrats for the $1.9 trillion blowout they passed in March of 2021. And by rationalizing high inflation as “transitory” for most of 2021, Powell continued the quantitative easing that monetized the debt from Democrats’ spending binge, while accelerating its inflationary effects.
The Fed Needs a New Leader
Having found themselves behind the inflation curve, Powell and the Fed spent this summer and fall raising rates in an attempt to overcome their prior lassitude. But one deserves little credit for cleaning up a mess of one’s own making, as even Powell’s predecessor Ben Bernanke called the Fed’s inaction last year a “mistake.” That mistake could prove costly for the American economy, as the Fed will likely have to tighten monetary policy harder, and for a longer period, than if it had acted sooner.
The failures of the Biden-Powell economic policies merit not just a new president, but a new Fed chairman — and Republican candidates should not hesitate to say so. As interest rates rise and the economy slows, Democrats will doubtless plead for the Fed to change tack and loosen monetary conditions; Sen. Elizabeth Warren, D-Mass., has already started the clamoring.
Conservatives have ample political and policy reasons for discussing Fed policy during the presidential campaign, to highlight the missteps of the Biden-Powell regime and reinforce the need for sound money as the sine qua non for American families. Moreover, with federal debt rising to historically unprecedented levels, and the need for fiscal consolidation looming, conservatives should pre-emptively warn against progressive attempts to monetize that debt via loose interest-rate policies that would prolong the current inflationary plague.
Define an Important Issue
Republican presidential candidates setting out lists of potential nominees for Federal Reserve Board vacancies will help draw clear contrasts. With inflation remaining stubbornly high and economic growth stubbornly stagnant, a focus on Fed nominees on the campaign trail will illustrate the stakes of the 2024 election on families’ budgets, just as Trump’s Supreme Court list clarified distinctions, and eased conservative anxiety, during his 2016 run.
As with the judiciary, publishing a list of potential Fed nominees would not undermine the Federal Reserve’s independence regarding the day-to-day management of monetary policy. It would, however, ensure that the Fed and the White House do not work at cross purposes, preventing events like this fall’s “Bailey circus,” in which Governor of the Bank of England Andrew Bailey publicly undermined then-Prime Minister Liz Truss’s attempts to reset fiscal policy. It would also ease the confirmation process two years from now if the Republican nominee wins the presidency.
The Trump administration saw one Federal Reserve nominee, Judy Shelton, go down to defeat on the Senate floor, while objections from Republican senators forced Herman Cain to withdraw prior to a vote. With the economy in flux and families on edge about their finances, the American people have no time for such uncertainty now. Voters need to know where the candidates stand on monetary policy — and the successful nominee needs an electoral mandate to confirm his or her preferred candidates.