These are the sorts of desperate measures the Fed takes in the midst of a true economic crisis. Even in the greatest economic disaster of a generation, the 2008 financial crisis, quantitative easing was highly controversial. So far, the only “crisis” is Mr. Trump’s fear that the economy he temporarily juiced with budget-busting tax cuts is beginning to cool — having never produced the sustained, breakneck growth Republicans promised would make them affordable — potentially harming his prospects in next year’s election.
The Fed was established to independently conduct the nation’s monetary policy because what a president wants in the short term can differ dramatically from what is desirable for the country’s long-term economic health. For this reason, previous presidents refrained from bullying the central bank. Mr. Trump obviously has other priorities.
On Tuesday, the president was at it again, telling reporters that the economy is “very far from a recession,”
but that the White House is considering proposals to slash taxes further. Mr. Trump raised the possibility that he would sidestep Congress to reduce capital gains taxes, a plan that would cost $100 billion over a decade and mostly benefit rich people. Another possibility is a payroll tax cut, discussions about which were revealed by The Post’s Damian Paletta. The Committee for a Responsible Federal Budget reckons that a two-year payroll tax cut similar to the one for 2011 and 2012 would cost the federal government nearly $300 billion, before interest costs.
Then, on Wednesday, Mr. Trump reversed course, saying he was “not looking at a tax cut now.”
We’re all for contingency planning. Germany’s central bank just warned that Europe’s largest economy may be entering a recession. Brexit turmoil threatens to make the situation worse in Britain and elsewhere on the continent. In the United States, Mr. Trump’s ruinous trade policies will begin slamming consumers harder on Sept. 1. They are already hurting farmers and businesses whose global markets and supply chains have been disrupted.
If economic conditions worsen sharply, one would hope the White House would have a plan at the ready. As economic stimulus goes, a payroll tax cut would be better than another tax cut aimed at the wealthy, and the cost might be justified in a recession. But it is not if the purpose is merely to keep the economic pump primed through Election Day 2020.
If the president wants to promote growth and soothe equity markets, he should end his pugnacious trade policies and pressure British Prime Minister Boris Johnson to deal reasonably on Brexit — instead of attempting to transfer the blame for slowing growth to his own hand-picked Fed chair.