FPI / May 17, 2019
Editor’s note: This is the second of a three-part series featuring an exclusive, wide-ranging interview with WorldTribune columnist Stephen Moore, key economic adviser to President Trump who was set for nomination to the Federal Reserve Board before attacks from the Left forced him to withdraw. In part one, Moore described how vicious those smears on his character and record really were.
Tim: Let’s talk about what you would have done if you were confirmed for the Federal Reserve Board. The president, like previous presidents, likes low interest rates and famously criticized the Fed for their rate hikes last year. Did you agree with the president and is the Fed right to have stopped the rate hikes this year?
Stephen Moore: I agree with Donald Trump for different reasons. He’s a real estate guy, that’s how he made his money and nobody is better at real estate development that Donald Trump. So you said it well, he just likes low interest rates. I like stable prices, and my complaint was that, what was happening and starting in the fall of 2018 is, we had three to three and a half to 4% economic growth, full employment, no inflation anywhere that could be seen, beautiful picture on the economy, exactly what we wanted. And the Fed comes along, Tim, and starts monkeying with the system by raising interest rates. It just made no sense. They made a bad decision in September and in then December, people may remember, they made their catastrophic decision of raising rates again and the economy kind of collapsed.
The stock market fell by 2,000 points when the Fed did that, and that should have been an indication. Maybe there’s something going wrong. And by the way, it was people like Donald Trump and I, we were criticized for being so harsh against the Fed, but we were proven correct because the Fed actually had to reverse its course in early January. And thank God they did because the economy then went back on its merry way and the stock market recovered, and a lot of it, I believe, is stable prices, I believe that the role of the Fed should be to make the dollar stable so that the dollars that you hold in your pocket and people are holding their pockets or in their bank accounts and their savings plans that they will be worth five or 10 years from now what they’re worth today.
That’s what you want from a currency. I mean, what is a currency? It’s something that retains its value. I think they’ve got way too many PhD economists who make this way too complicated, and that’s, I think, one of the threats because my idea was if you can’t create growth by printing money, growth does not cause inflation and you can’t grow an economy through government spending. And those are three very simple principles that most liberals disagree with.
Tim: Here’s a question I can ask you now that I couldn’t have asked you if you actually were on the Federal Reserve Board. It’s been over a hundred years since the Fed was established amid great controversy. Do you think the Federal Reserve Board is a good thing, or not so much?
Stephen Moore: I think it’s a good thing but I think there’s flaws in it. And one of the other controversial things, Tim, I talked about, which was like a cross in front of a vampire, was I said the Fed should be open and transparent and people should know. Everyone should know how they’re making the decisions and why they’re making the decisions they do, why then should it be Tim, why should it be a secret temple?
Tim: That’s largely what it’s been. Do you support auditing the Fed as many have over the years?
Stephen Moore: I want to audit the Fed. I want the C-SPAN cameras in there just as they are in the congressional hearing. I mean really I think it would be good for the Fed. I think it would be good for the economy. There’s all sorts of instability, and that’s because everybody’s trying to guess what the Fed should do. The other thing I want is I want to move more towards a rule-based monetary policy so everybody knows what the rule is. I like looking at a broad basket of commodities as one way of looking at what’s happening with prices and looking at consumer prices and other things. But commodities are good, good lead indicator where prices are and you adjust the price system and the interest rates based on what’s happening in the prices. That way everybody knows what the rule says, and you don’t have to have all this speculation out there, which is bad for the economy.
Tim: Let’s talk about trade, another in a litany of controversial Trump policies. You’re one of the nation’s leading advocates for free trade. But let me ask you this. Do the agreements we’ve had with China in particular over the years with high tariffs on their end and low tariffs on our end, does that actually amount to free trade?
Stephen Moore: Well look, my complaint with China is we just we don’t have a free trade arrangement with China. I hate tariffs by the way. I’m a free trade guy. Milton Friedman taught me my economics and he always said free trade is one of the most important pillars of prosperity. But you know, you’ve got a situation that we’re in a very abusive relationship with China. They lie, they cheat, they steal, they’re involved in cyber security issues, espionage. They’re involved in hacking into our computer systems. They’re stealing our intellectual property. It’s a big, big problem. I’m not so sure that tariffs are the best way to deal with it. But it’s on the table right now.
Trump has basically set these tariffs and I think the worst outcome now would be for Trump to stand down. We need China to stand down because there is nothing that Donald Trump is asking of China that is unreasonable. They should stop stealing our intellectual property. They should open up their markets to us. They should reduce their tariffs. They should stop the kind of takeover of companies that do business over there. They’d need to be a more open market system. And they’re just not right now.
Tim: It seems, Steve, that the president views tariffs as a means not an end, but how do you square your own strongly held belief in free trade and aversion to protectionism with the president’s willing embrace of tariffs?
Stephen Moore: Well, that’s a good question. I do hate tariffs because they are taxes, but I mean in this case – and look people can disagree on this – and I think there’s a good healthy debate here, but I do think you put it very well: In the end, I believe what Trump will accomplish here is freer trade. I think in the end China will stand down because they cannot withstand 25% tariffs there. It’ll ruin, it will destroy their economy. I think they’ll give in and what they do, it’ll be better for both countries. We’ll lower our tariffs. They lower their tariffs. We’ll have an open and free system. It’s a level playing field. I think both countries can prosper under that kind of situation, but we can’t, I don’t know about you Tim, I just don’t think we can go forward with this current relationship. If you’re in an abusive relationship, you have to get out of it.
FPI, Free Press International