WASHINGTON, DC – MARCH 28: (L-R) White House Deputy Chief of Staff for Legislative, Political, and … More
In his classic book Lombard Street, 19th century financial writer Walter Bagehot observed that due to the unwarranted prestige attached to central banks, posts within tend “to be desired by vain men, by lazy men, by men of rank.” President Trump, or those close to Trump, would be wise to heed Bagehot’s words as they consider Jerome Powell’s potential replacements, including Kevin Hassett.
Traveling back in time to 2005, a New York Times profile of Ben Bernanke from the same year included expressed surprise from Bernanke’s closest friends about his political affiliation. Specifically, they had no idea he was a Republican.
The Bernanke digression is useful as a way of vivifying Bagehot’s words. Bernanke wasn’t going to let political affiliation get in the way of the ultimate prize for economists, Chairman of the Federal Reserve.
It’s something to keep in mind with Hassett top of mind. As was seemingly the case with Bernanke, he’s shown a malleability (see a recent Washington Post piece for more details) on matters economic that signal worrisome ambition of the kind that Bagehot warned about. Beyond the Post analysis, just consider his recent interview with ABC’s Jonathan Karl about Brazil, and President Trump’s planned imposition of tariffs on the South American nation. Karl expertly exposed the obvious contradictions in Hassett’s defense of Trump’s tariff stance.
What’s important about what Hassett said on national television is that he knows better. This isn’t to say his economic views are impeccable. Far from it if we’re realistic. Just travel back in time to 2010 when, as an alleged solution to sluggish unemployment, Hassett teamed up with left-wing economist Dean Baker to make a rather French case for “work sharing.” In Baker and Hassett’s words,
“Under a work-sharing program, firms are encouraged by government policy to spread a small amount of the pain across many workers. In a typical arrangement, a worker might see his weekly hours go down by 20%, and his salary go down by about 4%.”
It seems bad ideas never die, no matter basic history telling us that unemployment has nothing to do with how many or how few individuals are looking for employment. No, Hassett’s economics aren’t impeccable. Fast forward to 2017, in an interview with Politico’s Ben White during which Hassett expressed fear once again about unemployment, he told White “it’s such an urgent problem that government programs that directly hire people might be part of the solution.” Governments extracting money from the private sector to hire workers for the public sector? No thanks.
Still, Hassett’s past commentary more than anything stamped him as a middle-of-the-road economist, and when middle-of-the-road economists look in the mirror, they see government solutions authored by themselves. It’s a long way of saying that wrongheaded as “work sharing” and “government hiring” are, it would likely be hard to find many economists who wouldn’t nod along to Hassett’s fallacies. Economics is stalked by them.
It’s a way of saying that while Hassett’s economic orthodoxy won’t disqualify him for the top Fed role, his willingness to say anything, including that there’s a “patriotic” quality to Trump’s tariffs, arguably should disqualify him. It should simply because Hassett yet again knows better.
Which means his interest in the Fed chairmanship well exceeds his willingness to stand firm on the most basic of economic principles. Watch out for such a person so publicly eager to attain substantial rank, including the top post for economists. As Bagehot said about those politicking for status, “such men are dangerous.”