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It\u2019s official<\/a>: America is set for a presidential election rematch between former President Donald Trump and President Joe Biden. The two candidates sealed their parties\u2019 nominations<\/a> this week when they each reached the required delegate count, setting up a replay of 2020 with the roles reversed: Biden the incumbent, vying for a second term he denied Trump, who is back in his comfort zone as the challenger.\u00a0<\/p>\n To say the two candidates have vast policy differences would be an understatement. But they do have one decision in common: Both nominated Federal Reserve Chair Jerome Powell<\/a> to his post atop the central bank of the world\u2019s largest economy.\u00a0\u00a0<\/p>\n However, their approaches to dealing with Powell illustrate not just the different policies one might expect from a Democrat and a Republican but staggeringly different beliefs each candidate has about the role of the Federal Reserve. Biden adhered to longstanding expectations that the president not interfere with the Fed\u2019s monetary policy. In fact, Biden, along with his spokespeople, regularly went out of their way to ensure White House did not even give the appearance<\/a> of doing so. Meanwhile, Trump\u2019s more bombastic approach was to exert public pressure on Powell that, more than anything, served to demonstrate the frailty of using \u201cpolitical norms\u201d to ensure the separation of powers in the U.S. government.\u00a0<\/p>\n Powell was first nominated<\/a> to the Federal Reserve Board of Governors in 2011 by former President Barack Obama. In 2017, Trump tapped him to lead the Fed<\/a> for his first four-year term. In 2021, Biden renominated<\/a> Powell despite some opposition from progressive Democrats<\/a>. That puts Powell in the unusual position of straddling two administrations, both of which he has had to lead through particularly turbulent economic times.\u00a0<\/p>\n Last month, Trump told<\/a> Fox<\/a> Business Network\u2019s Maria Bartiromo he would replace Powell<\/a>,\u00a0 reprising a theme of his presidency.\u00a0<\/p>\n Back in 2018, Trump openly groused about Powell, saying the Fed was raising interest rates at too quick a pace and hurting the stock market. Trump\u2019s frustrations reached a fever pitch at the end of the year with reports<\/a> that he was considering firing Powell, which set off a firestorm in D.C., not least because many constitutional scholars weren\u2019t even sure if the president had the legal authority to do so. Until then no president had publicly considered firing a Federal Reserve chair<\/a> for conducting monetary policy they disagreed with, much less crowed to the press about it.\u00a0<\/p>\n \u201cSo far, I\u2019m not even a little bit happy with my selection of Jay,\u201d Trump told<\/a> the Washington Post <\/em>in November 2018, referring to Powell by his nickname. \u201cNot even a little bit. And I\u2019m not blaming anybody, but I\u2019m just telling you I think that the Fed is way off-base with what they\u2019re doing.\u201d<\/p>\n Trump once said the only problem<\/a> facing the U.S. economy was the Fed, likening it to an unskilled golfer. He even compared Powell to Chinese President Xi Jinping, asking in August 2019, \u201cwho is our bigger enemy, Jay Powell or Chairman Xi?\u201d\u00a0<\/p>\n As usual, the Fed did NOTHING! It is incredible that they can \u201cspeak\u201d without knowing or asking what I am doing, which will be announced shortly. We have a very strong dollar and a very weak Fed. I will work \u201cbrilliantly\u201d with both, and the U.S. will do great\u2026<\/p>\n \u2014 Donald J. Trump (@realDonaldTrump) August 23, 2019<\/a><\/p><\/blockquote>\n While serving under Trump, Powell rarely referred to the former president by name or explicitly addressed the political pressure. He did, however, make broad statements about the importance of the central bank\u2019s independence.\u00a0<\/p>\n \u201cWe\u2019re never going to take political considerations into account or discuss them as part of our work,\u201d Powell said<\/a> in January 2019, shortly after the reports Trump was considering firing him. \u201cWe\u2019re human. We make mistakes. But we\u2019re not going to make mistakes of character or integrity.\u201d<\/p>\n On one occasion that month when he was asked directly if he would resign if Trump asked, Powell replied<\/a>: \u201cNo.\u201d\u00a0<\/p>\n Once in office, Biden distanced himself from his predecessor\u2019s behavior. In a Wall Street Journal<\/em> op-ed<\/a> in 2022, previewing a rare meeting with Powell, Biden wrote: \u201cMy predecessor demeaned the Fed, and past presidents have sought to influence its decisions inappropriately during periods of elevated inflation. I won\u2019t do this.\u201d\u00a0<\/p>\n The Fed\u2019s independence<\/a> from political considerations is considered critical<\/a> to its mandate to manage monetary policy. Without the freedom to make often-unpopular decisions to either slow down an overheating economy or pull it out of the sort of tailspin brought on by events like the pandemic or the 2008 financial crisis, the Fed would be subject to the vicissitudes of partisan politics\u2014with potentially disastrous results. For instance, an unscrupulous government official could engineer an economic crisis to hurt a political rival, or juice the economy in the short term to bolster their own tenure in office, while hurting its long-term health by causing it to overheat.\u00a0<\/p>\n In his interview with Bartiromo, Trump rejected the idea of Fed independence<\/a>, saying he considers the Fed \u201cpolitical,\u201d specifically Powell. \u201cI think he\u2019s going to do something to probably help the Democrats,\u201d Trump said.\u00a0\u00a0<\/p>\n He continued: \u201cIt looks to me like he\u2019s trying to lower interest rates<\/a> for the sake of maybe getting people elected. I don\u2019t know.\u201d<\/p>\n Against that backdrop, Biden\u2019s commitment to the usual firewall<\/a> between a presidential administration and the Fed stands in stark contrast to Trump\u2019s openly political pressure. The president has regularly stated his intention to adhere to, not influence, the Fed. During Biden\u2019s June meeting with Powell when inflation was peaking he expressed faith in the Fed\u2019s ability to lower prices.\u00a0<\/p>\n \u201cMy plan to address inflation starts with the simple proposition: Respect the Fed, respect the Fed\u2019s independence, which I have done and will continue to do,\u201d Biden said<\/a>.\u00a0<\/p>\n A few months later in December, when Biden made an offhand comment that a particularly strong monthly jobs report meant the economy was \u201cin a sweet spot<\/a>\u201d and might not need further rate hikes, it was treated with surprise, although at least one other Fed official\u2014Atlanta Federal Reserve Bank president Raphael Bostic\u2014had publicly predicted that further interest rate increases<\/a> wouldn\u2019t be needed.<\/p>\n In the meantime, the usual political swirl of an election and the Federal Reserve\u2019s continued fight against inflation could collide in the fall. The first round of rate cuts meant to loosen the economy is widely expected to start around June<\/a>. With a consensus of at least three rate cuts<\/a> forecasted for this year, it appears likely later ones will come when the country finds itself in the thick of election season.<\/p>\n<\/div>\n\n\u2018Way off-base\u2019<\/strong>\u00a0<\/h2>\n
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Biden\u2019s firewall vs Trump\u2019s wrecking ball<\/strong><\/h2>\n
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