President Trump won his election as a straight-talking truth teller from outside the political establishment. Now, less than three months after taking office, he is reversing himself on some major questions about the American economy.
In an interview with the Wall Street Journal published Wednesday, Trump said he wanted to reopen the Export Import Bank — an obscure agency despised by his party's conservative faction — and that he would not formally accuse China of manipulating its currency, reversing positions he held during the campaign.
Yet Steven Moore, one of Trump's economic advisers during the campaign, said he was not concerned about Trump's latest flip-flops. Few ordinary voters feel strongly about the Export Import Bank, and Trump's rhetoric on China will probably satisfy most of his supporters with or without the label of a currency manipulator.
According to Moore, a greater risk for Trump is whether he can fulfill the promises for which he is best known — building a wall on the Mexican border, reducing taxes and undoing President Barack Obama's health-care law, known as Obamacare.
“Look, what made Trump so attractive to so many of the Trump voters was this idea that … he wasn’t just a standard politician who says one thing and does another thing, so he’s got to be careful about that,” Moore said. At the same time, he added, “It’s the big promises that matter most.”
That does not mean, however, that Moore agrees with all of his former boss's new ideas. For instance, Trump criticized Janet L. Yellen, head of the Federal Reserve, during the campaign, accusing her of manipulating interest rates to help Obama. But in this week's interview, Trump was more complimentary. Asked whether he would replace Yellen when her term expires next year, Trump left open the possibility that she might keep her job. “I like her. I respect her,” he said.
Moore argues that Yellen — along with many economists and bankers whom Republicans appointed to the Fed — has involved the central bank too deeply in regulating the financial sector and propping up the economy. Instead, Moore argues, the Fed should concentrate on maintaining a sound U.S. dollar.
“We, as conservatives, believe the Fed should basically have one mandate, and that is to keep the dollar stable and to keep inflation down,” Moore said.
“Janet Yellen has to go,” he said. “The free-market conservatives — I think they’re universal in wanting to get rid of Yellen. I think people would be very disappointed."
Trump's support for low interest rates is not a surprise, Moore said, noting that presidents typically do prefer low rates. With reduced rates, it is cheaper for businesses and households to borrow money, stimulating the economy and hiring and helping presidents win reelection.
Also, Trump said in the interview — as he has said on several previous occasions — that he feels the dollar is too strong, meaning that it is too expensive for foreigners to buy dollars with their own currency. If the Federal Reserve maintains interest rates near zero instead of increasing them as expected, the dollar would likely weaken.
With a strong dollar, U.S. exports are more costly, and domestic manufacturers and other firms with foreign customers get less business. Trump has said that encouraging exports and limiting imports is a major priority, but Moore took issue with Trump's support for a weaker dollar.
A strong dollar holds down the cost of foreign goods, keeping inflation in check, Moore noted. At the same time, a strong dollar indicates confidence in the U.S. economy. When investors want currency to invest in the United States, they bid up the price of the dollar.
Historically, Moore argued, successful presidents have supervised the economy when the dollar was strong, and the currency has been weak while unsuccessful presidents were in office. For instance, Presidents Nixon, Ford and Carter wrestled with a weak dollar throughout their terms, while the greenback recorded gains under Presidents Reagan and Clinton.
Indeed, Moore said, if Trump delivers on the promise of a rapidly accelerating economy, his success would draw in investors from around the world, and the dollar would almost certainly appreciate.
“Advocating a weaker dollar is I don’t think good policy or good politics,” Moore said. “A strong dollar is a strong president, and a weak dollar is a weak president.”