Letter to the Editor: Rumored Federal Reserve candidate has poor track record, is bad for Wisconsin
Wisconsin’s economy has sputtered since the Great Recession, with slower wage growth and deeper income inequality than most American states.
Though Governor Scott Walker likes to make audacious claims about how our state has fared under his leadership, Wisconsin has fared poorly by almost every measure, ranking dead last in new business activity, and lagging behind neighboring states in job creation and poverty.
It’s easy to see why so many Wisconsinites were disaffected with the economy, and were attracted by Donald Trump’s promise to create “jobs, jobs, jobs” last fall.
Now nearly a year after Wisconsin voters proved so critical to Trump’s victory, Trump faces his most pivotal economic decisions yet: who to appoint to the Federal Reserve.
Trump has already failed to reappoint current Chair Janet Yellen, who has brought the national unemployment rate down from 6.5 to 4.2 percent during her tenure — going against precedent dating back to the 1930s while passing over one of the most successful Fed Chairs in history — for no other reason than that she is a woman appointed by Barack Obama.
Trump’s two choices to the Federal Reserve so far, Jerome Powell and Randal Quarles, come from the same powerful private equity firm, Carlyle Group, and he has three — and possibly four — more spots to fill on the seven-member Board of Governors who will serve for 14-year terms.
The Board of Governors is the Supreme Court of the economy — both because its decisions have such a huge impact and also because appointments will have long-lasting effects beyond this administration.
Trump has the power to choose the majority of the Fed who can push anti-worker policies and dangerous deregulation for over a decade.
Foremost among the rumored candidates is economist John Taylor. Taylor is most famous for supporting a policy that economists estimate would have cost 2.5 million jobs over the past five years.
As speculation around Taylor’s candidacy grows, Taylor came to Wisconsin on Oct. 26th for the inaugural event of the Center for Research on Wisconsin’s Economy, a new project funded by the ultraconservative Koch brothers.
The Koch brothers — two of Walker’s biggest backers — have helped cause significant damage to Wisconsin’s economy, and it’s clear they want to export those policies nationally.
When it comes to the Federal Reserve, billionaires like the Kochs prefer to have someone like Taylor in charge. Taylor is obsessed with inflation, which is generally more of a concern for wealthy individuals who don’t want their assets to lose any value — even if it means fewer jobs for the rest of us.
Meanwhile, Taylor is indifferent to job growth. He wants the Fed to focus exclusively on inflation and to stop following its full employment mandate, the legal requirement that the Fed must consider jobs in its decision making.
In 2010, while the economy was still reeling from the financial crisis, he urged the Fed to ignore levels of unemployment unprecedented since the Great Depression and withdraw its support for the economy by issuing a slew of warnings about inflation that never materialized.
This would seem to be why the Kochs kicked off their takeover of Wisconsin’s economics department by welcoming Taylor to campus, even though his policies would result in even slower growth and less worker-friendly policies in our state.
I attended Taylor’s panel in hopes of asking him questions about the approach he’d take as Fed chair.
Unfortunately, the event’s question and answer session was not open to critical voices, as is par for the course for the shadowy Koch brothers.
I wish the university had welcomed an open academic discourse with an economist who may be about to wield tremendous power. If I had had the chance to ask questions of Taylor, I would have asked the following three questions:
First, you endorsed the Sound Dollar Act of 2012 — a bill that would have eliminated the Federal Reserve’s full employment mandate. But Fed Chair Alan Greenspan kept interest rates low to see if the unemployment rate could get below 6 percent — the level that many economists believed would accelerate inflation at the time.
Greenspan was right, the unemployment rate dropped to historic lows without sparking inflation. Doesn’t this experience suggest that it is possible to achieve stable prices and low unemployment? Why should the Fed ignore the needs of workers who cannot find good jobs and wages?
Second, during the Obama administration, you said that “regulatory uncertainty” surrounding Obamacare and Dodd-Frank was the chief cause of unemployment.
Today, there is even more regulatory uncertainty regarding both Obamacare and Dodd-Frank. Congress remains gridlocked, with partisan polarization at an all-time high. The House passed a bill to effectively repeal Dodd-Frank, while the Senate and executive agencies are divided over what to do about financial regulations.
Are you still concerned that this chaotic environment is causing employers not to hire? Why or why not?
Lastly, in 2010, you warned that another round of quantitative easing would risk “currency debasement and inflation.”
The Fed continued large-scale asset purchases after that, yet inflation has remained below its two percent target, even through today. Why do you think the inflation you predicted never materialized?
I hope Donald Trump turns away from the Koch brother-inspired policies that have fueled inequality and extreme poverty in Wisconsin.
When it comes to the Fed, the best thing Trump could do to bring “jobs, jobs, jobs” to states like Wisconsin is to reject candidates like John Taylor.
Nominating John Taylor could prove very dangerous, and risks making the weak economic recovery in Wisconsin even weaker.
How do you feel about Jerome Powell replacing Janet Yellen? What are your thoughts about the upcoming Fed appointments? How do you think that Koch brothers’ tactics have influenced Wisconsin’s politics? Please send any questions, comments or concerns to us at firstname.lastname@example.org.Subscribe to The Daily Cardinal Newsletter