The speculation of whether Biden will reappoint Powell has been gaining media attention, as Powell’s term expires in February of next year. A few peculiarities stand out, as reported by the New York Times when they asked:
Should he reappoint Jerome Powell to lead the Federal Reserve when Mr. Powell’s term ends early next year, or select a replacement who is more fully aligned with the Democratic policy agenda?
But what about Fed independence?
We’ve long been told the Fed acts independently, ensuring the President and his cabinet does not control the nation’s fiscal and monetary policies. This reads as though the Fed should properly align itself to carry out the bidding of the ruling party.
It gets stranger! Earlier this week, two Democrat Senators, John Dodd and Barney Frank urged Biden to reappoint Powell for a second term. Reuters reports that the Senators believe:
Powell’s approach to monetary policy – downplaying the risk of inflation in favor of encouraging stronger employment gains – would help Biden achieve his broader economic goals.
Any notion of appointing a Fed chair to help Biden achieve his goals flies in the face of Fed independence and raises alarms as to the state of monetary policy in America. The exact quote, as written in The Hill, sounds more bizarre. When referring to Powell, the Senators wrote:
His denial that excessive inflation is either imminent or inevitable given current Fed policy comes from a Trump appointee (as chair, although not initially as a governor) not previously known as a liberal and/or a subscriber to the “deficits don’t matter” school.
Powell, who apparently downplayed the increase in prices, really impressed the Senators. They effectively approve of the Fed misleading the public, and clearly… debt doesn’t matter.
The Senators followed with:
Immediately, for moderate Democrats, Powell offers both a much bigger shield against conservative accusations of fiscal irresponsibility than the same actions coming from a newly appointed liberal.
Providing three additional reasons why Powell makes for a good chair:
First, these were not major attacks on the legislation, and nothing in Powell’s performance contradicts his assertion that he supports the basic framework we put in place.
The Fed chair is supposed to be responsible for monetary policy. This should have nothing to do with any framework the ruling political party has in place.
Second… it is wholly implausible that Powell would initiate controversial deregulatory steps while he continues to focus on the economy.
This only becomes admirable if one is of the mindset that deregulation is bad or that it would cause too much of a headache if politicians were forced to go through any deregulation proceedings. The Senators concluded that:
Finally, as to climate change: Nothing a Fed led by a liberal Biden replacement could do on its own would be nearly as important in dealing with this issue as the substantive provisions in the legislative package that the reappointment of Powell would facilitate.
While somewhat childish, they’re argument is that it’s better for a Republican to tackle climate change through the Federal Reserve than a Democrat.
Again, it just seems all so strange. An unapologetic endorsement for Powell comes not on the basis of virtue, economic acumen, or any past accomplishment; rather, his ability to make the party, for all intents and purposes, look good while playing by their rules.
THIS ARTICLE ORIGINALLY POSTED HERE.
