Whose Rules: A Disappointing Debate for Fed Watchers

Full disclosure: I’m an economic policy nerd who supports the Fed’s decision not to raise the federal funds rate. I think that raising rates would have risked major harm to the economic recovery, while the inflationary risk of maintaining the existing rate is minimal given that the inflation rate is well below the Fed’s target rate of 2 percent.

The point is, since it can mean the difference between recession and recovery, between runaway inflation and stable prices, monetary policy affects every American. And since the candidates’ stated policies on the Fed differ wildly—Clinton wants to reform the Fed but would likely keep Fed chair Janet Yellen, while Trump would replace Yellen with someone who would raise rates—I think that debates about Fed policy should be heard by everyone.

I was disappointed to hear the Fed brought up only once during Monday’s debate, by Donald Trump in a way that was almost entirely non-substantive. Throughout this election cycle, Trump has proven his mastery of the entertainment component of politics. In March, it was estimated that he received more than $2 billion worth of free media coverage, and many people tuned into the debate just to see Trump’s performance. But even I was surprised at just how Trump made Fed policy into spectacle.

Right before mentioning the Fed, Trump said forcefully: “We are in a big, fat ugly bubble. And we better be awfully careful.” He used his trademark hyperbole to reframe his subject according to his own personal logic before explaining it in black and white terms: “The Fed is doing political—by keeping interest rates at this level… The Fed is being more political than Secretary Clinton.” Instead of backing up his point and defending one of his policies, Trump made a crack about President Obama playing golf. Then Trump circled back around and said the same thing he said before, this time as a conclusion.

Even though Clinton has a progressive proposal on the table that would reduce the amount of indirect private bank control over Fed policy, she did not respond to Trump, and moderator Lester Holt moved on to the next question. To be fair, it is not easy to explain why interest rates should be maintained, and in a format that often privileges entertainment value over policy value, it may have been wise of Clinton not to go into a detailed retort. Unfortunately, the consequence of this is that anyone watching the debate is likely to come away being less informed in general about the Fed, as Trump was allowed to make an unfounded and unchallenged attack on an institution that affects the life of every American.