The Fed Is Not an Island

Opposition to Trump’s extreme overreach needs to be the norm, not the exception.

It was heartening to hear the vocal opposition from Republican and Democratic members of Congress, financial executives and former Federal Reserve leaders from across administrations to the Justice Department’s blatantly political investigation of Fed Chair Jerome Powell for alleged cost overruns on renovations of the central bank’s headquarters. The unprecedented criminal probe is clearly designed to intimidate Powell, strip the Fed of its independence and get it to significantly lower interest rates before the midterm elections.

Unfortunately, this is not an isolated event but part of a wider assault by President Donald Trump on dozens of independent agencies and other vital organizations across the government. Since taking office a year ago, Trump has fired without cause inspectors general, independent agency commissioners, administrative law judges, government-affiliated nonprofit leaders, and career civil servants.. Trump’s clear purpose is to ensure he has complete control, without any restraint or oversight, of our government.

Photo by Joshua Hoehne on Unsplash

Sadly, the political and public outcry to the administration’s much larger power grab has been muted, an extremely troubling sign for our future.

Though there is no doubt that an independent Fed is necessary for our country’s economic success, sensible interest rates alone do not ensure our country’s vitality. Is the Securities and Exchange Commission’s responsibility to safeguard fair and effective markets not also critical? And the work of the Federal Communications Commission to protect our national communications infrastructure? The same is true for the 30-plus other historically independent agencies and other important government functions.

Congress and the financial and business communities seem to understand that we won’t have a thriving economy if interest rates are based on politics as opposed to professional economic judgment, but the Federal Reserve is not on an island by itself.

The blatant politization of so many other government organizations represents a troubling departure for our country and will increase the likelihood of decisions shortchanging the public by tilting the playing field toward partisan and personal interests of Trump and future presidents.

The stakes become vastly larger when we consider that Trump’s targets for vindictive criminal investigation and prosecution now include an array of elected officials opposing his decisions and even a private citizen who was married to a protester shot by an immigration agent. The rule of law is being trampled, and defending the independence of the Fed is not sufficient to preserve our liberty and democracy.

During the past year, the Supreme Court, without formal rulings, has given Trump a green light to fire members of a wide array of independent agencies and replace them with loyalists. A Supreme Court decision on the issue is expected later this year in Trump v. Slaughter, a case that centers on the Federal Trade Commission and that could permanently expand presidential power for Trump and future chief executives.

This threat comes at the same time the president is moving to politicize the nonpartisan civil service with the imposition of new rules that will allow the administration to arbitrarily and without due process protections fire tens of thousands of federal employees in “policy-influencing” roles who were hired for their expertise, not their political affiliation. Trump also is instituting policies to base new hiring on political loyalty, not merit, in an effort to stack the government with employees who will blindly follow his every whim.

The outcry on Capitol Hill and elsewhere over the attack on the Federal Reserve, with threats by at least two Republican senators to block confirmation of anyone nominated by Trump to replace Powell when his term expires in May, shows that Trump’s power grab has its limits and that he will not easily get his way on undermining the independence of the nation’s central bank.

But this opposition to Trump’s extreme overreach needs to be the norm, not the exception.

The lesson from the Powell case and Trump’s earlier attempt to tarnish and oust Federal Reserve board member Lisa Cook, now awaiting a Supreme Court decision, is that public understanding and response matters, and that if enough Republican senators and others speak up, Trump’s effort to drastically remake the government and assume unrestricted power can be curtailed.

The Supreme Court is not immune from public pressure, and its move toward the radical remaking of our government needs to be more fully understood by the public.

The bottom line is that neither the high court nor members of Congress should be given a free pass. The time is long overdue for lawmakers, especially those in the Republican Party, to forcefully speak out against the president’s abuse of power and seek to protect the rule of law and the integrity of the government’s independent agencies that were designed to guard the public welfare, not cater to the president’s whims and private interests.

Max Stier is the founding president and CEO of the nonpartisan, nonprofit Partnership for Public Service.

---

The Contrarian is reader-supported. To receive new posts, enable our work, help with litigation efforts, and keep this opposition movement alive and engaged, please consider joining the fight by becoming a paid subscriber.