I believe that the Federal Reserve acted appropriately in cutting interest rates last week, though I understand how reasonable people could disagree. But the surrounding cacophony created by breaking news alerts, presidential tweets, observers engaging in Talmudic examination of Fed Chairman Jerome Powell’s news-conference comments and market gyrations certainly did not inspire confidence in our financial authorities or our economy.
Imagine what would happen if the nine justices of the Supreme Court regularly gave speeches regarding cases on their docket. Imagine further if the chief justice, 30 minutes after every decision was released, were to supplement the opinion by holding a news conference. Finally, imagine if the president of the United States blustered incessantly about what the court had done and was considering doing and how it affected his political prospects. (This last point, given the census case last term, is not so hard to imagine, I realize.)
This would in some sense be Supreme Court transparency. But it would, I submit, detract greatly from Supreme Court legitimacy. Active, ongoing debate among justices, who would be listened to only because they were justices even if they claimed to be speaking only for themselves, would make the court’s judgments seem more arbitrary. The president’s participation in the debate would make the court seem more political. The fact that observers would undoubtedly sometimes misinterpret signals given by the justices would make the court seem less predictable. And the fact that new evidence and arguments would lead opinions to evolve over time would make the court seem more fickle.
So I doubt any sensible observer would favor Supreme Court reform along these lines. Yet I have essentially described the way in which the Federal Reserve functions. This is troubling because we want the Fed, just like the Supreme Court, to be insulated from political temptation, to be respected for its technical expertise and to serve as a source of authoritative judgment.
The president should heed the advice of all experts and respect the Fed’s independence, of course. If he did, in the current circumstances, the result would probably be lower interest rates and a stronger economy as the Fed’s credibility is enhanced.
At the same time, the Fed should concentrate on doing its job of managing interest rates and dial back the public-debating society aspect, the public soul-searching about its communications and, especially, its penchant for predicting its next moves in a world where everyone knows it cannot predict the economic future.
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