While the willingness to abandon long held beliefs for political gain has always been a common trait among public figures, the spectacle has recently taken on shocking levels of casual audacity. The contempt for even minimal levels of intellectual consistency has allowed Kamala Harris to condemn Joe Biden for his past opposition to Federally mandated busing while simultaneously taking the exact same position herself. These somersaults are particularly common with former economic conservatives seeking to curry favor with President Trump’s decidedly non-conservative policies.
We have seen former free-trader Larry Kudlow awkwardly embrace high tariffs and big deficits, and economist Stephen Moore disavow decades of monetary hawkishness to position himself as a potentially reliable Trump loyalist. But the most dizzying reversal came this week when supposedly conservative Reagan administration economist Arthur Laffer (in what I believe to be an audition for a job in the Trump Administration) hit the airwaves to make the case that the Federal Reserve should be run directly by the President, not by the Fed’s supposedly independent governors. Come again? Direct political control of a central bank has always been the bogeyman of any conservative economist. Was he serious?
Readers of my commentaries would expect me to be the last person to defend the status quo at the Federal Reserve. Let me be clear, I believe that giving a group of economists the power to set interest rates and regulate the availability of money and credit is a bad idea. I would prefer that there were not a Fed at all, and that interest rates were set by the same free market forces that so successfully regulate other areas of the economy. Since its establishment more than a century ago, the Federal Reserve has only succeeded in destroying the U.S. dollar, hollowing out American industry, massively increasing the size of the Federal Government, and creating a bubble economy completely addicted to borrowing and spending.
But just because something is bad, doesn’t mean that it couldn’t be far, far worse. And that certainly would be the case if we were to put the powers of the Federal Reserve into the hands of politicians whose only goal is to pander to as many constituencies as possible in order to get reelected.
Among the political elite of both parties there has never been, nor will there ever be, any sustained support for monetary or fiscal discipline. For politicians the near-term perception of success is all that matters. Warnings about the dangers of deficits and debt monetization only arise from whatever party is in in the opposition, where their meaningless protests serve only as easy rhetoric. Politicians in power will always consider what is politically expedient over risking the wrath of voters by doing what’s unpopular, even if they believe such actions to be in the best interest of the nation.