Jawboning

Jawboning is defined as attempting to persuade or pressure by the force of one's position of authority. It is noteworthy that the party doing the jawboning usually lacks knowledge or expertise in the field in question; hence the attempt to use their position of authority to achieve their goal. Jawboning is tantamount to verbal bullying; however, unlike bullying in the school yard or on the internet it can be seen as a legitimate way for disparate entities to promote their agendas in a free society. Some might call it lobbying which may be the subject of another post.

This post is mainly about the Federal Reserve Bank which has been the target of jawboning by politicians of all stripes over almost its entire history. The Fed, as it is generally referred to, was established in 1913 by an act of Congress after a prolonged debate between the banking and business interests on one hand and the federal government on the other. The government was concerned about ensuring stability in the banking system and avoiding the periodic panics that plagued the economy. The banks and businessmen were concerned about government regulation. The Federal Reserve Act represents a balance between these interests. The Fed was given what has come to be known as the dual mandate of ensuring a stable rate of inflation and full employment and was given a number of tools to carry out that mandate. The Fed answers to Congress, hence the Fed Chair's semi-annual testimony before the relevant House and Senate Committees. The Fed is also subject to audit by an independent public accounting firm and the Government Accountability Office (GAO). In keeping with the principle of checks and balances in our Constitution the Chairman and members of its Board of Governors are appointed by the President and confirmed by the Senate. However, the Fed is set up to be accountable to Congress, not the Executive Branch. Its independence, like that of other governmental bodies, is relative, but must be maintained. Interference in the work of the Fed by the Executive and Legislative Branches can and has resulted in economic upheavals.

The reason I wanted to write about the Fed is that former President Trump has recently said that the president should have a say in the deliberations of the Fed. Presidents have often felt frustrated by decisions of the Fed Board regarding interest rates, money supply and other aspects of monetary policy. Jawboning usually follows in these cases. But, by statute, the president does not have the power to impose his or her will on the Fed's decisions. Making the case for himself Trump said, "I think that in my case, I made a lot of money, I was very successful, and I think I have a better instinct than in many cases, people that would be on the Federal Reserve or the Chairman". Setting aside the issue of the kind of business practices that led to his "success" and the fact that those practices have earned him criminal convictions in the courts, I take issue with the idea that "better instincts" should supersede knowledge of economics and experience in banking when it comes to choosing members of the Federal Reserve Board and setting monetary policy. In any case, by now we should know better than to accept Trump's word on anything. There should be no doubt that if he got his way on this issue, he would not hesitate to use his power to enrich himself. This alone is, in my opinion, enough to oppose Trump's re-election.

What makes it possible for Trump to suggest a change in the way monetary policy is set is the growing tendency among the public to question the authority of experts in any field. This tendency was responsible for resistance to the public health measures which the CDC tried to introduce during the COVID pandemic and the refusal of many to be vaccinated against a variety of communicable diseases. Those promoting skepticism about science and scientists pick on the mistakes made by scientists in the course of their work. There is no doubt that scientists are not omniscient, nor that mistakes were made in the handling of the COVID pandemic. There, too, there was overt jawboning by President Trump. But the fact is that science relies on trial and error for advancement. John Maynard Keynes, an economist, is credited with the quote "When the facts change, I change my mind. What do you do, sir?" Healthy skepticism promotes the acquisition of knowledge. Blanket skepticism of expertise amounts to throwing the baby out with the bath water. There is a difference between opining with knowledge and simply opining. It is one thing for a section of the public to be science-skeptic. It appears that this sort of skepticism has now infiltrated the Supreme Court. In (Loper Bright Enterprises v Raimondo) the Court handed the authority to resolve complex issues involving specialized knowledge in different areas to the judiciary. True, the case that led to this decision involved the government requiring fishermen to pay for the inspectors overseeing their activity and does appear to be an over-reach. But does it call for throwing out the whole system of Executive Branch administration of ambiguously worded laws? It is also true that the Judiciary is tasked with determining the constitutionality of laws. But does this qualify judges trained in law to resolve complex non-legal issues? The Court could have ruled on the case before it without using it as a pretext to turn the whole system on its head. What we have here is nine constitutional lawyers deciding, by a 6-3 majority, how complex issues will be resolved in the future. This is yet another reason to deny Trump a second term. Where this slippery slope leads, we will see in the fullness of time. Hope it won't be too late.