WASHINGTON — In 1964, although there was scant chance that Americans would choose to have a third president in 14 months, Lyndon Johnson took no chances.
The economy was sizzling and in November Johnson would carry 44 states. Nevertheless, he wanted low interest rates, so he summoned to his Texas ranch Federal Reserve Chairman William McChesney Martin Jr., the longest-serving chairman (1951-1970), for whom one of the Fed’s two Washington buildings is now named. Johnson (this from “Capitalism in America: A History” by Alan Greenspan and Adrian Wooldridge) “gave [Martin] the once-over, shoving him around the room, yelling in his face, ‘Boys are dying in Vietnam and Bill Martin doesn’t care.’”
In 1969, Richard Nixon, already plotting reelection, summoned to the White House Arthur Burns, who Nixon had nominated to become Fed chairman. According to John Ehrlichman’s memoir “Witness to Power,” Nixon said:
“‘Arthur, I want you to come over and see me privately anytime. … I know there’s the myth of the autonomous Fed.’ … Nixon barked a quick laugh. … ‘And when you go up for confirmation some senator may ask you about your friendship with the president. Appearances are going to be important, so you can call Ehrlichman to get messages to me.’”
Past instances of presidential pressure on the Fed are pertinent to Donald Trump’s hectoring of Jerome Powell, the Fed chairman he regrets having chosen. Trump’s public coarseness makes Johnson’s and Nixon’s private behavior seem comparatively couth. Fortunately, Powell seemingly regards the president’s clamor for low interest rates as white noise, unworthy of notice.
The Fed’s structure largely insulates it from political pressure, but structure can only do so much. Today’s controversy concerns Trump’s nominees to fill the two vacant seats on the Fed’s seven-member board of governors, Herman Cain and Stephen Moore. Whether or not their untidy sex lives are disqualifying, a sufficient disqualification is that both are notably partisan Trump acolytes and neither has satisfactory credentials or experience.
The GOP’s descent into vaudeville began with the 2008 vice presidential nomination of Sarah Palin, it accelerated in 2011 when Cain was taken seriously as a presidential candidate, and it reached warp speed with the party’s capture by the man who takes Cain seriously as a maker of monetary policy. Cain’s certitude about his economic nostrums is inversely proportional to the study he has invested in the subject, which probably has involved less effort than he recently invested in organizing a PAC to promote Trump’s reelection. Cain’s and his nominator’s boundless confidence in their economic beliefs demonstrates the Dunning-Kruger Effect. It is named for two Cornell psychologists who in 1999 described the bias by which the lower a person’s intellectual ability, the more the person tends to overestimate it.
Some thoughtful people regret, as Cain does, the end of the gold standard, but they understand, as he does not, that fiat money is here to stay. Similarly, Moore might be right that the Fed would function better if it bound monetary policy to a prudent rule. There are, however, reasons to doubt that Moore knows what the rule should be (he certainly wrongly ascribes a particular rule to former Fed Chairman Paul Volcker), and there are reasons to expect that the rule he would advocate at any moment would reflect his assessment not of macroeconomic facts but of partisan advantage.
The fact that presidents nominate judges with whose jurisprudence they agree does not of itself “politicize” courts, because most cases that courts consider are not directly related to partisan issues, and because the political fortunes of presidents and their parties are rarely immediately impacted by the court’s decisions the way the Fed’s economic decisions can impact them. Hence the danger of Trump’s crude attempt to lower the Fed’s intellectual quotient while increasing the perception that the Fed is a political plaything. In a crisis like that of September 2008 the Fed influences not just the U.S. money supply but something that can suddenly be even more important — the world’s confidence supply. The Fed’s prestige is perishable, and endangered by these two nominees.
Populism, democracy’s degenerate byproduct, incubates hostility to people possessing specialized knowledge (aka “elites”), but senators can withhold consent from particularly egregious abuses of institutions that are particularly dependent on the perception of competence. The Cain and Moore nominations will be two more tests — of political courage, and of their institutional responsibility — for Senate Republicans to fail. The possible good news is that these two confirmation votes might bring us closer to the day when supine senators grow weary of being embarrassed and embarrassing.
George Will’s syndicated column appears regularly in the Tribune-Herald. His email address is georgewill@washpost.com.
