Stephen Moore, President Trump’s new pick to join the Federal Reserve, took a highly unusual step this week for a nominee to serve on a central bank, which takes pains to distance itself from politics.
He went on conservative radio to sell his message, saying he would advocate lower interest rates, a position President Trump has demanded but that most Fed officials, including Chair Jerome H. Powell, oppose.
“It’s not enough for the Fed to say, ‘We’re not going to raise rates.’ They have to be going back to where we were in the summer of 2018,” Moore said Monday on “Mornings on the Mall.” “The only thing holding back the economy right now is tight money. It’s excessively tight.”
Moore’s words were certain to delight Trump, who has complained that the Fed has been undercutting economic growth, but they put Moore on a collision course with current Fed leaders.
With Congress probably deadlocked on major legislation, the Fed’s course could be a major factor shaping the economy in the coming years. If it cuts rates, it could bolster economic growth and conceivably tip the 2020 election toward Trump. But the risk, according to former Fed officials and Wall Street experts, is that the Fed loses its credibility to make tough, apolitical decisions.
“If Moore is confirmed, I think he would give the White House a direct pipeline into the Fed,” said Greg Valliere, chief U.S. policy strategist at AGF Investments. “It would intensify market concerns about the Fed’s independence.”
Moore’s long history of making combative — and sometimes factually incorrect — statements is likely to be a key focus if he moves forward in the Senate confirmation process. Every word a Fed governor utters is heavily scrutinized by Wall Street, economists and politicians and can trigger turmoil in markets.
Lately, Moore has been saying the U.S. economy is experiencing deflation, when prices fall, but that isn’t backed up by government data. Moore has also said Powell “spent his whole career” at the Fed. In reality, Powell spent most of his career in private equity and only joined the Fed in 2012.
Moore could also face scrutiny over $75,000 in unpaid taxes and a $350,000 penalty the Club for Growth paid to settle Federal Election Commission violations when he was president of the political advocacy organization.
A number of prominent economists, including Greg Mankiw, a former top economist for President George W. Bush, oppose Moore’s nomination and urge the Senate to vote no.
Two senior administration officials said the White House was closely monitoring the growing criticism of Moore and watching to see how things would unfold. (The officials talked on the condition of anonymity because they were not authorized to speak publicly.) It’s not clear when Moore will be formally nominated by the White House. Two of Trump’s other nominees to the central bank failed before receiving a final Senate vote.
In interviews this week with national media, including with The Washington Post, Moore tried to cast himself as a team player eager to work with Powell, a different message than the agenda he had laid out on conservative radio. Three months ago, Moore said in an interview that Powell should be fired for “economic malpractice.”
Moore has a tax lien against him for $75,000 in unpaid taxes that he owes the Internal Revenue Service, a fact first reported by the Guardian. Moore directed questions about the lien to his wife, Anne Carey, who did not respond to requests for comment. She told Bloomberg News that her husband’s 2014 return had erroneously claimed a deduction for child support payments to Moore’s former wife, which is not allowed.
In a statement Thursday, Moore did not address the child support payments but said he was due money from the IRS.
“For several years I have been working through a dispute with the IRS, attempting to be returned what my attorneys and accountant believe were tax overpayments of tens of thousands of dollars,” Moore emailed Thursday. “I am eager to reach an agreement.”
Most nominees for the Fed have a background as a professional economist, a longtime economic policymaker or a financial executive. Moore, 59, is a visiting fellow at the conservative Heritage Foundation who joined Trump’s campaign to craft its tax plan and remains in the president’s inner circle. For most of his career, Moore has worked as an economic commentator or at conservative think tanks. In 1999, he co-founded the Club for Growth to help elect GOP candidates who would cut taxes and regulations, in several cases trying to unseat moderate Republicans.
But Moore was ousted from the Club for Growth in 2004. The FEC investigated the Club for Growth’s activities while he was at the helm of the organization and said it failed to register as a political committee and submit its expenditures properly “despite spending millions of dollars on federal campaign activity during the 2000, 2002, and 2004 election cycle.” The Club for Growth ultimately paid a $350,000 penalty to settle with the FEC.
Moore didn’t comment on the Club for Growth case this week, and the organization declined to comment. At the time, Club for Growth officials cast the investigation as politically motivated because it began after the Democratic Senatorial Campaign Committee filed a complaint with the FEC.
“If we had proper respect for the First Amendment, such a lawsuit never would have taken off the ground to begin with,” said Chuck Pike, vice president of the Club for Growth at the time.
Former Fed officials are concerned Moore’s often political approach could be seen as tainting the Fed’s independence. For decades, the central bank has worked to promote confidence that it is willing to do what is necessary to keep markets stable even if it means short-term hits to economic growth — and without regard to the political consequences.
“I view it as the first strike and really something over the longer run that could impact the culture of the place,” said Jeremy Stein, a Harvard University economist who served at the Fed from 2012 until 2014.
But Moore says he isn’t going to be a Trump lackey once he gets to the Fed. He has not been shy about criticizing Trump’s immigration and trade policies — or the president’s personality.
“I’ve always said with Donald Trump there is a good and a bad and an ugly,” Moore told young conservatives over the summer. “He’s like the classic cartoon character with an angel on one shoulder and a devil on the other, and when I say my prayers at night, I pray that the angel prevails. ”
Moore’s recent criticism of the Fed for setting interest rates too high is notable because he attacked the central bank a decade ago for setting rates too low.
During the financial crisis, he said the Fed was making a mistake cutting interest rates to near zero, warning it could spur huge inflation and undermine the dollar. Neither happened.
Some of Moore’s close allies said that, despite his recent comments, Moore would not cut interest rates so low just to appease Trump.
“I think Steve will be a responsible Fed board member,” said Edward Hudgins, who worked with Moore at the Heritage Foundation and on Capitol Hill.
Appearing on Wednesday on another conservative talk show, “The Capitol Hill Show” with Tim Constantine, Moore said that as a Fed governor, he would push for “high growth, high wages and zero inflation.”
The Fed regards 2 percent inflation as a healthy goal for the economy.
Moore’s comments on talk radio match the provocative style he has used for decades.
“Trumpism as a political phenomenon wasn’t a big mystery to us. We had lived through two terms of a mostly failed Republican president in George W. Bush,” wrote Moore and economist Arthur B. Laffer, a longtime friend, in their recent book “Trumponomics.”
Friends and adversaries of Moore describe him as an “affable” person who’s quick to organize dinner parties and talk with pride about his three sons. But they also say Moore rarely holds his tongue.
In 2013, Moore told Politico that if he were president, he would allow Texas and other Southern states to secede from the Union.
In 2012, he said at a conservative fundraiser, “Greta [Van Susteren] is absolutely perfect for Fox News: She’s fair, balanced and blonde . . . one of the best things about working at Fox News is I have met a lot of beautiful women. ”
In a commentary for the National Review, he called soccer a “Marxist” sport that “teaches our kids all the wrong lessons” in life.
“What makes pewee soccer particularly insidious is that boys and girls play together,” he wrote. “No one seems to care much that student sports is doing irreparable harm to the psyche of America’s little boys.”
In September, he wrote in an op-ed that Trump “deserves the 2018 Nobel Prize in economics.”
Moore’s comments on the Fed, especially his distaste for Powell, are likely to get the most scrutiny.
Just before Christmas, Moore met with Trump and told the president that former Fed chair Janet L. Yellen, a Democrat, “couldn’t be any worse than the guy you’ve got in there now,” according to Moore’s and Laffer’s accounts of the meeting.
As Trump began asking close confidants if he could fire Powell, Moore publicly called for Trump to do it.
Moore’s nomination is strongly backed by Laffer and Larry Kudlow, the head of Trump’s National Economic Council and a longtime friend of Moore’s (Kudlow was the best man at one of Moore’s weddings).
But Kudlow and Laffer both told The Washington Post in the past week that they support Powell and do not want him removed as chair. Moore now says he “regrets” calling for Powell to be fired.
Moore has made a name for himself in GOP circles as an expert on taxes and the budget. His monetary views have, at times, raised eyebrows.
Moore has called for the United States to return to the gold standard, where every dollar has to be backed by a certain amount of gold. The nation began to abandon this policy in the 1930s and fully dropped it in 1971, making it easier for the Fed to pump more money into the economy during times of financial duress.
Recently, Moore has insisted that the problem now is the United States is experiencing deflation, when prices fall. That’s not true, according to the government’s inflation metrics, which show that the cost of living is rising about 1.5 percent a year.
“Steve Moore is amiable, but he’s been outrageously wrong on his monetary policy prescriptions in the past and on factual points of history of what the Fed has done,” said Tony Fratto, former deputy press secretary to Bush.
In interviews with major media outlets in recent days, Moore has tried to backpedal on some of his ideas, saying he needs to “study up” on Fed policies.
But when speaking with conservative radio this week, he doubled down on his argument that the United States is experiencing deflation.
“If you look at many of the areas of the economy, especially agricultural products, oil and gas, they’ve actually been falling in price. That’s a sign of deflation. I know that’s a controversial position,” Moore said. “I believe we don’t have price stability right now.”
Correction: A previous version of this report incorrectly said Greg Valliere is the chief global strategist at Horizon Investments. Valliere joined AGF Investments in February.