Janet L. Yellen was the most qualified Federal Reserve chair we’ve ever had and maybe the most successful Federal Reserve chair we’ve ever had. But, in part because she was also the shortest Federal Reserve chair we’ve ever had, she wasn’t reappointed by President Trump.
That’s not a joke, or at least not a deliberate one. Trump, according to The Washington Post, seems to believe that the Fed is a lot like a roller coaster: You have to be so tall to go on it. In particular, he thought that the 5-foot-3-inch Yellen was too short to do the job that she’d been doing so well the previous four years. Which, along with wanting to make his own mark on the central bank, is why he broke with what had been a fairly long-standing bipartisan tradition of keeping on a Fed chair no matter which party had originally nominated them as long as they still wanted the job and seemed good at it.
You might say this was the height of a bad decision.
That’s not to criticize current Fed Chair Jerome H. Powell. He’s done a good job, and in fact probably hasn’t acted much, if any, differently than Yellen would have in his place. Indeed, she thinks that the Fed’s recent rate hikes have been “thoroughly sensible,” is similarly worried about the possibility of the economy overheating and, as a result, supports raising rates at least a few more times from here on out. Which means that it seems unlikely Trump would have gotten the lower interest rates he’s so desperate for even if he’d been willing to look past the fact that Yellen might not be your first pick to start on a new WNBA team.
But that’s not really the point. So what if this isn’t an example of poetic justice — where Trump’s superficial approach to policy is the reason he didn’t get what he wanted. He still has a superficial approach to policy that has the potential to create all kinds of problems. We’re not always going to be as lucky as we have been with Powell, who apparently looks like he came out of, as Trump puts it, “central casting” but who also happens to be qualified for the job.
In the meantime, though, the message is clear enough: Neither a perfect résumé nor a perfect record is enough to impress Trump. Yellen, after all, had both — she has a PhD in economics from Yale, has headed the Council of Economic Advisers, and has been a Fed governor, Fed president and Fed vice chair, before finally becoming Fed chair and overseeing an economy where inflation averaged just 1.2 percent and unemployment 5.1 percent during her four years. And she still got passed over. To put that in perspective, Yellen not only had the economy closer to the Fed’s stated goals of low inflation and low unemployment than any other Fed chair has but also, going by what’s known as a central banking “loss function,” made the second-biggest improvement at this than any of her predecessors did.
The only blemish on her record is that, in retrospect, the Fed probably should have waited a little longer to start raising rates like it did at the end of 2015, considering that manufacturing had already stopped expanding at that point. But, to her credit, she quickly realized that and put the Fed’s further rate-hike plans on hold for the next 12 months.
The idea that Yellen is too short for the job is a tall tale.