Tom Cotton admits Trump, not Biden, caused inflation

Republicans hammered the Biden administration on inflation. Democrats have attempted to respond by blaming supply chain shortages caused by the pandemic. But Republican Senator Tom Cotton has a completely different theory: He attributes inflation to Donald Trump’s poor selection to lead the Federal Reserve.

Cottons’ point of view, set out in a Wall Street Journal editorial, places the blame for inflation squarely on Jerome Powell, the chairman of the Fed. Mr Powells Fed has forced millions of American families to choose between paying the mortgage, feeding their families, filling up with gas, heating their homes or buying Christmas presents, he says.

Cotton makes this case during the explanation of his upcoming vote against the re-appointment of Powells. And obviously, Cotton is not trying to blame Trump (whose name does not appear in his column). But, while all Powell will do in his second term will be on Biden, the reason Powell got the job in the first place is because Donald Trump appointed him.

Trump chose Powell in large part because he considered his predecessor, Janet Yellen, too small to effectively manage monetary policy. Once in office, Powell was an inflation dove, leaving interest rates low in order to keep the economy going. Trump constantly demanded that Powell push interest rates even lower.

Cottons’ point of view implies that Powell was wrong, and Trump was even more wrong:

Mr. Powell also maintained the Fed’s sweeping emergency monetary policies a decade after the end of the 200708 financial crisis. Thus, the Fed had already exhausted normal monetary policy tools when the pandemic struck and was forced to use unprecedented levels of government intervention to support the US economy. As a result, the Fed’s balance sheet stands at nearly $ 9 trillion and continues to grow by over $ 100 billion per month. As a perspective, the Fed’s balance sheet barely exceeded $ 2 trillion after the financial crisis.

Of course, the flip side of high inflation levels is that the economy is growing rapidly and unemployment is falling rapidly. Cotton does not like compromise, believing that keeping inflation low is the only objective of monetary policy. (The Fed’s main mission is to ensure stable prices and a healthy currency, he writes, omitting any role in balancing low inflation with low unemployment.)

I happen to think Trump’s preference for low interest rates and a vibrant economy was correct. Cotton does not agree. But whatever your position on the merits of the Trump-Powell interest rate regime, Cotton tells us that inflation levels are Trump’s fault, not Bidens’ fault.

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