Should Jerome Powell be re-appointed?

Without Trump in office, and without the fear that tight money will erode vote margins in the short run, Republicans are about to unite overwhelmingly behind the talking point that monetary policy needs to be substantially tightened immediately. Powell, being a Republican worthy, will listen and toe this line. If you think that the standard Republican hard-money perspective is good policy at this stage in the recovery, that is your prerogative. But if you do not sympathize with this view, you should be staunchly against Powell’s reappointment.

For the most part, the Fed has gotten good marks for what it did during the COVID-19 pandemic. But the Fed remains more controversial politically than it was before 2008.

One thing that can put the Fed on more solid ground politically is when Chairs appointed by a president of one party who have done a good job are reappointed by a president of the other party. That happened for Ben Bernanke. It probably should have happened for Janet Yellen. Now, Joseph Biden has the chance to depoliticize the Fed somewhat by reappointing Jerome Powell. Jerome Powell was appointed to the Board of Governors by Barack Obama and appointed Chair by Donald Trump. Jerome has, thus, a bipartisan imprimatur already, that would be burnished further by being reappointed Chair by Joseph Biden.

Biden should renominate Powell for the climate’s sake. The argument for keeping him is simple. Biden wants to do a lot of hard things to combat climate change, including passing an infrastructure bill, regulating car and truck pollution, revitalizing American industry, and attaining full employment. Powell is a Republican who wants to reach full employment. By keeping him, the president can spend more political capital on his other goals. That’s really it.

If Powell is replaced by a Democrat, there’s no guarantee that his successor would continue to keep interest rates low. But even if that did happen, the Fed’s new framework would inherently become much more polarized.