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**FEBRUARY 24, 2023**
Kuttner on TAP
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**** The Fed's Own Economists
Challenge Interest Rate Folly
Biden should appoint a prominent dissenter to the open post of Fed vice
chair.
Minutes of the most recent Federal Reserve meeting
<[link removed]>
show that all members of the policy-setting Federal Open Market
Committee agreed to keep strangling the economy with still more
quarter-point rate hikes later this year, and some even wanted
half-point hikes. Maybe they should read this study by the Fed's own
staff economists
<[link removed]>,
which found that the Fed's inflation target of 2 percent is impossible
to reach without a deep recession.
The study, by Randal Verbrugge and Saeed Zaman of the Cleveland Fed,
found that, using the Fed's own projections, inflation would still be
at 2.75 percent by the end of 2025-moderate by historic
standards-and reducing it all the way to 2.0 percent would require an
unemployment rate of 7.4 percent, more than double the current rate.
President Biden has an opportunity to alter the Fed's folly by naming
a prominent dissenter as Fed vice chair. He created that opening when he
moved Lael Brainard from the Fed to the White House to head the National
Economic Council. It's only one vote, but having a powerful voice to
challenge the Fed's conventional wisdom on inflation and interest
rates could make a constructive difference.
Fat chance. News leaks suggest that the White House is looking at the
usual suspects, and worse. Two of the top contenders according to The
Wall Street Journal
<[link removed]>
and Politico, Karen Dynan and Janice Eberly
<[link removed]>,
served during the Obama era as chief economist at the Treasury, the home
of utter orthodoxy on matters financial. This suggests the continuing
and unfortunate influence of Treasury Secretary Janet Yellen, formerly
chair of the Fed, who sometimes behaves as if she is running both
institutions.
Another leak, this one to Bloomberg
<[link removed]>,
suggests that Austan Goolsbee is also under consideration. Goolsbee, a
centrist economist of no particular distinction, was a loyal member of
the neoliberal Obama economic team led by Larry Summers. He now serves
as president of the Chicago Fed, and has conventional views on inflation
<[link removed]>.
You have to wonder if Biden has personally focused on this key
appointment or if his conservative advisers are leading him down this
foolish path. When Biden was considering reappointing Jay Powell to
chair the Fed, his views were carefully vetted. Powell feigned monetary
dovishness, and Biden gave him the job-a disastrous mistake.
The candidates for vice chair should be vetted at least as carefully.
Appointment of a dissenter would usefully break the Fed norm of iron
consensus, and maybe even free the economy from a needless
recession-on the eve of Biden's re-election campaign.
~ ROBERT KUTTNER
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East Palestine Residents Are Still Skeptical
<[link removed]>
High-profile visits, shoddy testing protocols, and unclear FEMA
assistance guidelines leave residents worried. BY JAROD FACUNDO
Republicans Pretend to Be Hippies in Ohio
<[link removed]>
The party of deregulation and pollution is blaming Joe Biden and Pete
Buttigieg for the East Palestine derailment. Democrats should take
notice. BY RYAN COOPER
Corruption at the Fifth Estate
<[link removed]>
Lack of disclosure on de facto lobbying at think tanks has triggered a
bipartisan reaction. BY LUKE GOLDSTEIN
Defense Denied
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Many poor Texans are being shortchanged on their right to be represented
by a defense attorney in cases with potentially life-changing
consequences. BY ROB D'AMICO
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