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Economists Forecast Stephen Moore Wouldn't Be Good For Fed Post

Mar 27, 2019
Originally published on March 28, 2019 9:23 am

President Trump's pick for a powerful post on the Federal Reserve Board is drawing mounting criticism from economists of all stripes.

Trump said on Friday that he plans to nominate Stephen Moore, a campaign adviser and conservative pundit, to serve on the Fed's Board of Governors.

"I have known Steve for a long time – and have no doubt he will be an outstanding choice!" Trump tweeted.

The IRS is trying to collect more than $75,000 in back taxes from Moore, according to tax lien records first reported by The Guardian. Moore is disputing the tax.

Even before that news broke, the idea of installing Moore on the central bank's governing body had prompted a strong backlash.

"Almost universally, economists have spoken out and said this is not a fit candidate for a board position," said William Luther, who directs the Sound Money Project at the American Institute for Economic Research.

Moore has spent decades opining on economics — at the conservative Heritage Foundation, on the editorial pages of The Wall Street Journal and on cable TV.

"I've been a economic policy person in Washington for well over 30 years," Moore told NPR's Morning Edition. "So I do think that I have probably more experience in this game than many, many other people and in fact a lot of the people who have served on the Federal Reserve Board."

It's precisely that track record that worries many economists.

"More than possibly any other economist in modern America, he has a track record of getting the big issues wrong," said Justin Wolfers of the University of Michigan. "Not just occasionally but time after time."

During the Great Recession, for example, Moore complained that the Fed's efforts to prop up the economy with low interest rates would spark runaway inflation. That never materialized. Today, with unemployment below 4 percent, Moore is making the opposite case, warning that by raising interest rates last year, the Fed was causing a dangerous drop in prices, or deflation.

That prompted a testy exchange in December on CNN with Washington Post columnist Catherine Rampell, who pointed out — correctly — that none of the indicators watched by the Fed show deflation.

Critics say that Moore's counterintuitive prescriptions for Fed policy — tight money in bad times, loose money in good — seem to be guided more by who's in the White House than any objective measure of the economy.

"If your goal is to stabilize the macroeconomy, then Stephen Moore's policies go in exactly the wrong direction," said Luther of the American Institute for Economic Research. "If instead your goal is to push Democrats out of office and get Republicans re-elected, then Stephen Moore's policies make perfect sense."

Opponents say that this partisan bent could jeopardize the Fed's reputation for independence and apolitical action.

Moore's credentials as a partisan player are well-established. He was one of the founders of the Club for Growth, which advocates limited government and low taxes. In 2012, Moore helped design a tax-cutting experiment in Kansas that blew a big hole in the state's budget but failed to produce the promised economic boom.

"There is this segment of economists who want to believe, whether the facts support them or not, that low-tax states will grow better than other states," said Miriam Pepper, who was editorial page editor at The Kansas City Star. "It certainly didn't work in Kansas. It was a disaster, so they've had to retreat."

Eventually Kansas lawmakers changed course and reversed the tax cuts. Nevertheless, Moore wrote an op-ed for the Star in 2014 defending the cuts and insisting that low-tax states outperform others. Only after the column was published did Pepper and her colleagues discover that Moore had his numbers wrong. When the paper ran a correction with the right numbers, the data didn't support Moore's argument.

"That kind of factual error is just unacceptable," Pepper said. "While he was the so-called top economist at Heritage, we decided we were finished with him."

Even conservative economists who might share Moore's policy preferences have spoken out against his nomination. Harvard University economist Greg Mankiw, who advised then-President George W. Bush, wrote that Moore doesn't have the "intellectual gravitas" for an important job like the Fed.

Professional economists don't have a vote on Moore's nomination, though. Senators do. And so far no Republican senator has spoken out in opposition.

Read more stories from NPR Business.

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There is mounting criticism over President Trump's pick to fill a vacancy on the Federal Reserve. Trump has said he wants to nominate campaign adviser and conservative pundit Stephen Moore to a powerful post on the Fed's Board of Governors. The Guardian newspaper reported today that the IRS is trying to collect more than $75,000 in back taxes from Moore who says he's disputing the tax. And even before that news broke, there were widespread complaints about Moore's fitness for the Fed position. NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: Stephen Moore has spent decades opining on economics at the conservative Heritage Foundation, on cable TV, on the editorial page at The Wall Street Journal and occasionally, like today, on NPR's Morning Edition.

(SOUNDBITE OF ARCHIVED BROADCAST)

STEPHEN MOORE: I've been a economic policy person in Washington for well over 30 years, so I do think that I have probably more experience in this game than many, many other people - in fact, a lot of the people who have served on the Federal Reserve Board.

HORSLEY: It's precisely that track record that worries many economists, like Justin Wolfers of the University of Michigan.

JUSTIN WOLFERS: More than possibly any other economist in modern America, he has a track record of getting the big issues wrong, not just occasionally but time after time.

HORSLEY: During the Great Recession, for example, Moore complained the Fed's efforts to prop up the economy with low interest rates would spark runaway inflation. That never materialized. Today, with unemployment below 4 percent, Moore is making the opposite case, warning that by raising interest rates last year, the Fed was causing a dangerous drop in prices, or deflation. That prompted this exchange on CNN with Washington Post columnist Catherine Rampell.

(SOUNDBITE OF ARCHIVED RECORDING)

MOORE: Both of the rate hikes were unnecessary and have caused a deflation in the economy, and I think they're the biggest danger...

CATHERINE RAMPELL: There is no - wait, wait, wait, wait. I want to stop you there. I want to stop you there because you said this last time I was on with you. There is no deflation. You look...

MOORE: Yeah, there is.

RAMPELL: No, there is not.

HORSLEY: She's right. There's not. William Luther, who runs the Sound Money Project at the American Institute for Economic Research, says Moore's counterintuitive prescriptions for Fed policy - tight money in bad times, loose money in good - seems to be guided more by who's in the White House than any objective measure of the economy.

WILLIAM LUTHER: If your goal is to stabilize the macroeconomy, then Stephen Moore's policies go in exactly the wrong direction. If instead your goal is to push Democrats out of office and get Republicans re-elected, then Stephen Moore's policies make perfect sense.

HORSLEY: Moore's credentials as a partisan player are well established. He was one of the founders of the Club for Growth, which advocates limited government and low taxes. Moore was one of the architects of a tax-cutting experiment in Kansas in 2012. Miriam Pepper was editorial page editor at The Kansas City Star.

MIRIAM PEPPER: There is this segment of economists who want to believe, whether the facts support them or not, that low-tax states will grow better than other states. And it certainly didn't work in Kansas. It was a disaster. So they've had to retreat.

HORSLEY: The economic boom that Moore and others promised never arrived. And eventually, Kansas lawmakers changed course. Nevertheless, Moore wrote an op-ed for The Kansas City Star in 2014 defending the tax cuts and insisting low-tax states outperform others. Only after the column was published did Pepper and her colleagues discover Moore had his numbers wrong. When the paper ran a correction with the right numbers, they didn't support Moore's argument.

PEPPER: That kind of factual error is just unacceptable. While he was the so-called top economist at Heritage, we decided we were finished with him.

HORSLEY: Even conservative economists who might share Moore's policy preferences have spoken out against his nomination. Harvard economist Greg Mankiw who advised former President George W. Bush says Moore doesn't have the intellectual gravitas for an important job like the Fed. Professional economists don't have a vote on Moore's nomination, though. Senators do. So far, no Republican senator has spoken out in opposition. Scott Horsley, NPR News, Washington.

(SOUNDBITE OF POOLSIDE'S "NEXT TO YOU") Transcript provided by NPR, Copyright NPR.