At first it seemed strange that President Trump would nominate Herman Cain to the Federal Reserve.
Not because Cain, the former Godfather’s Pizza CEO best known for briefly leading the polls during the 2012 Republican primaries on the strength of his cartoonishly regressive “9-9-9” tax plan, has been so ill-informed about the economy that he’s fallen for a few conspiracy theories. Or because he’s been accused of sexual harassment so many times that he’s had to stop running for public office. Or even that it can be hard to tell how much of what he’s doing is just grift-inspired performance art, like when he dropped out of politics by quoting extensively from the Pokémon movie, before embarking on a new career hawking penny stocks to his onetime supporters.
No, the real reason it was slightly confusing that Trump would want Cain on the Fed is that Cain has wanted the Fed to do the opposite of what Trump does. Which is to say that he’s called for it to raise interest rates, whereas Trump has made it clear that he vastly prefers for them to be lower — at least while he’s in office. Things begin to make more sense, though, once you realize that Cain has set up a super-PAC devoted to defending Trump.
Why does that matter? Well, it helps to make sense of Cain’s otherwise inexplicable — and very conveniently timed — ideological evolution. See, like Trump’s other recent Fed nominee, Heritage Foundation fellow Stephen Moore, Cain spent the Obama years advocating for a return to the gold standard. That just means that instead of trying to keep overall prices growing by 2 percent a year, the Fed would solely focus on making sure that gold prices didn’t rise or fall at all. Which, in practice, would force it to raise rates whenever supply and demand meant that gold prices “wanted” to go up, and only allow it to cut them when they “wanted” to go down. The problem, though, is that gold prices tend to increase both when the economy needs much higher rates and when it needs much lower ones. So half the time it would require us to adopt a disastrous policy. Indeed, that would have been the case in 2008, when gold prices soared just as the economy was crashing. Raising rates then would have only turned our Great Recession into a full-on Great Depression. Not that that should be too surprising. After all, it’s what the gold standard did in the 1930s, too.
But Cain didn’t seem overly concerned about any of this even though literally every top economist in the University of Chicago Business School’s poll of them would tell you that the gold standard is a bad idea. Instead, he celebrated what he thought was the fact that the higher interest rates it would cause would make it harder to bring about bigger government (though that’s not necessarily true). “The gold standard is to the moochers and looters in government, what garlic and sunlight are to vampires,” Cain wrote in what reads as barely concealed Ayn Rand fan fiction.
All of that changed, though, once the White House’s occupant did. Cain, again just like Moore, has gone from saying we need to raise rates to fight nonexistent inflation under Obama to now saying we might have to cut rates to fight nonexistent deflation under Trump. “I would try to encourage the Fed not to make inflation a fear factor,” Cain recently told Fox Business channel’s Stuart Varney, “because deflation is more of” one.
That is absurd as it gets once you consider that prices are rising faster now than they were when Cain and Moore were both warning us that we had to raise rates lest we turn into Zimbabwe.
These kind of transparently partisan policy preferences — high interest rates under Democratic presidents, low interest rates under Republican ones — seem to be what Trump is looking for more than anything else. How else would you explain the fact that he’s been so upset with his previous Fed picks who, while generally supporting low interest rates, have only done so insofar as the economy, and not Trump’s approval rating, needs them? Trump wants people who are personally loyal to him, who are willing to argue that prices are rising one day and falling the next depending on what serves his interests the best in that moment — and in both Cain and Moore he’s found people who have amply demonstrated they will.
The good news, to the extent that there is any, is that Cain and Moore would be only two votes out of 12 in a group where the force of your arguments, rather than your political connections, matters. But the bad news is the Fed would start to change from a technocratic institution where any mistakes are made in good faith to a partisan one where they might not be — and that this might not be the end of it, either.
The most bizarre part of this all, then, is that any Republican senators might go along with it.