Thread by @joshbivens_DC

There’s a narrative going around that Trump deserves credit, however grudgingly given, by progressives who have long argued that the Fed should be more willing to test the lower limits of unemployment. This seems clearly wrong to me. 1/20

The argument runs that by leaning on Fed chair Powell to keep rates low, Trump has stopped the Fed from raising rates and cutting off the recovery too soon. It’s certainly true that in its history the Fed has cut recoveries short far too often. 2
epi.org/blog/focus-on-…

But what’s the evidence that it’s Trump, not something else, that has led the Fed to be more admirably open-minded in testing how low unemployment can go this time? I’d argue, in fact, that Trump’s carping has been an obstacle, not a help, in the push for more dovish policy. 3

What’s the big misstep made by the Fed since the Great Recession began? The steady raising of rates that began right when Trump was elected and persisted through 2018. This premature tightening definitely slowed the economy. 4
epi.org/blog/why-is-th…

The public pressure to raise rates in this time was explicitly tied to Trump. Sometimes the pressure cited (dumbly) his decisions to throw more fiscal stimulus into the economy. Sometimes (even worse) it was argued directly that the Fed should aim to damage Trump’s re-election. 5

It seems really likely to me that Fed Chair Powell would strongly like to maintain the Fed’s independence from presidential pressure. The Fed chair who was publicly seen as having sacrificed that independence would take a real hit to their reputation. 6

Given this, my guess is that Powell would love to zig when Trump wants him to zag - I think he would genuinely like a good reason to raise rates in defiance of Trump because he would see this defiance as being good for the Fed as an institution. 7

But luckily, Powell for now has decided that the full employment mandate is more important than symbolically demonstrating Fed independence in a way that would threaten that mandate.8

It hasn’t been a costless decision – even some progressives have acted as if he’s been reduced to being Trump’s stooge. 9

But if Trump’s bellowing has hurt the cause of keeping rates low to test the depths of unemployment, why are they so low now, when past Feds would’ve already stomped the recovery out? 10

Mostly b/c an extraordinarily strategic and dogged intellectual campaign has been waged to convince the Fed that it has often been too quick to raise rates. The key players in this campaign deserve FAR more credit than Trump for the Fed’s (admirably open-minded) evolution. 11

These key players include progressive economists (who then managed to convince some open-minded economists who don’t necessarily consider themselves ideologically aligned with the left), journalists writing about the Fed, and activists. 12
epi.org/publication/la…

Naming the key players individually would require a whole ‘nother thread – lots of people have pitched in. But the @Fed_up_campaign of @popdemoc deserves a ton of credit for making this wonky inside campaign go more viral. 13

There’s a reason why regional Fed presidents like @neelkashkari, and even Powell himself, have routinely stressed the progressive benefits of tight labor markets – particularly for marginalized communities – in their official communications in recent years. It’s not Trump. 14

In short, the idea that the Fed should be more aggressive in letting unemployment fall did not just come to them in 2019 because Trump began screaming. It has been argued to them for years, and they have been evolving publicly on this well before Trump. 15

Despite this evolution in recent years, the big Fed backslide happened in 2018 even as Trump was bellowing. This doesn’t seem like a huge coincidence. In a counter-factual Clinton admin over the past 3 years, there’s zero reason to think interest rates would be higher today. 16

Finally, the strategy pushed by this progressive campaign for a better Fed has not rested on “have the president scream for lower rates while simultaneously trying to appoint people who have been career hard-money zealots”. 17

It’s been more, um, nuanced than this. It has tried to persuade Fed decision-makers directly, argued for smart appointments of evidence-minded governors, and looked to change the institutional and governance structures of the Fed that impede its full employment mandate. 18

One example of this: 19
epi.org/publication/ma…

So, no, as a monetary dove I feel zero reason to give Trump any credit for today’s more open-minded Fed. He’s been an obstacle, not a help. 20