As 2018 draws to a close, there is growing concern about what the next year will bring for the American economy. President Trump’s twin self-inflicted wounds of an ongoing trade war with China and a needless government shutdown helped send stock markets into a December panic. The expanding global economy, too, shows signs of a slowdown, as evidenced by sputtering Germany factories, sluggish Chinese retail sales and a cooling U.S. housing market. But still solid U.S. GDP growth and strong holiday sales point to an American economy that is more solid than fluctuating markets would suggest. That’s why “the real risk is not that insurmountable challenges knock the economy off course,” Neil Irwin cautioned in the New York Times, but “that poor leadership converts moderate economic shocks into a crisis.”
By “poor leadership,” Irwin had in mind the current occupant of the Oval Office. It was bad enough that he dispatched his Treasury Secretary Steve Mnuchin to reassure the world about the health of U.S. banks, a mysterious announcement that only served to cause concern where there had been none. But making matters worse is Trump’s unprecedented campaign to scapegoat the Federal Reserve.
Not content to proclaim “the only problem our economy has is the Fed,” Trump has been complaining for weeks that “they’re raising interest rates too fast.” In recent days, he lamented that under his handpicked Chairman Jerome Powell, the Fed has “gone crazy” and will “turn me into Hoover.” By Thursday, chairman of the White House Council of Economic Advisers Kevin Hassett countered rumors that the president would take the previously unheard of step of sacking the Fed Chairman, declaring Powell’s job “a hundred percent” safe. Those were doubtless calming words to those like David Rosenberg of wealth management firm Gluskin Sheff who fretted earlier in the week:
“If Powell gets terminated, what we’ve seen happen in the markets in the past few weeks will look like a walk in the park.”
Whether or not Donald Trump has a point about the pace of interest rate increases (more on that later), his norm-shattering threats directed at the Federal Reserve are doubly disturbing. After all, other presidents who faced the prospect of the Feds putting the brakes on an economic expansion showed restraint altogether lacking in number 45. And as it turns out, the bellyaching over interest rates from Donald Trump and his Republican allies is a gymnastic reversal on the position they espoused when Barack Obama was in the White House.
Take, for example, candidate Trump’s statements during the 2016 campaign.