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Friday, February 02, 2018

Paul Krugman: The Gang That Couldn’t Think Straight

"lower-level Fed appointments are becoming cause for concern":

The Gang That Couldn’t Think Straight, by Paul Krugman, NY Times: ...A remarkable number of Trump appointees have been forced out over falsified credentials, unethical practices or racist remarks. And you can be sure there are many other appointees who did the same things, but haven’t yet been caught. ...
But what’s the problem? After all, stocks are up and the economy is steadily growing. Does competence even matter?
The answer is that America ... can run on momentum for a long time even if none of the people in charge know what they’re doing. Sooner or later, however, stuff happens — and then incompetence becomes a very big deal...
What kind of stuff may happen? The scariest scenarios involve national security. But we can’t count on smooth sailing for the economy, either. And who will manage economic turbulence if and when it hits? After all, we currently have perhaps the least impressive Treasury secretary in U.S. history.
Matters are a bit better at the Federal Reserve, where nobody seems to have bad things to say about Jerome Powell, just confirmed as Fed chairman. On the other hand, why didn’t Trump just follow the usual norms and appoint Janet Yellen, who has done a fantastic job, to a second term?
One answer may be that Trump is a traditionalist — and few things are more traditional than passing over a highly qualified woman in favor of a less qualified man. But I also suspect that he found Yellen’s independent stature threatening.
And lower-level Fed appointments are becoming cause for concern.
Last week, senators at a confirmation hearing questioned the economist Marvin Goodfriend, whom Trump has nominated for the Fed’s Board of Governors. Democrats pointed out that Goodfriend was wrong, again and again, about monetary policy during the crisis, repeatedly predicting inflation that didn’t happen.
Now, everyone makes bad predictions now and then; God knows I have. But you’re supposed to face up to your mistakes, figure out what went wrong and adapt your views. Goodfriend refused to do any of that. And why should he? His errors were politically correct; they reinforced Republican orthodoxy. From the G.O.P.’s point of view, having been completely wrong about monetary policy isn’t a defect, it’s practically a badge of honor.
The point is that even at the Fed, which is partly insulated from the Trumpian reign of error, U.S. policymaking is being denuded of expertise. And the whole nation will eventually pay the price.

    Posted by on Friday, February 2, 2018 at 11:31 AM in Economics, Monetary Policy, Policy, Politics | Permalink  Comments (132)


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