Trump Drags the Fed Down Into the Political Mud

The process for nominating the next chair of the Federal Reserve System has changed beyond recognition. President Donald Trump has turned the decision-making into something akin to a game show, where suspense is maximized, and the debate is similar to “who gets voted off the island.” Although this circus harms our politics generally, it is a new and novel way of politicizing monetary policy.

The Fed over time has done a good job establishing its relative independence and, for the most part, the federal government has been supportive. The fear had been that a president might summon a Fed chair and request easy money to boost his re-election prospects, as President Richard Nixon did with Arthur Burns in the lead-up to the 1972 election. We’ve avoided that scenario so far under Trump, but a subtler and more insidious form of Fed politicization may set in: The mystification of the Fed may be replaced by an extreme banalization.