Economist Paul Krugman: Praise for Trump nominee shows 'very low bar'

Economist Paul Krugman during FIDES 2023 at the Windsor Hotel in Rio de Janeiro, Brazil on September 25, 2023 (A.PAES/Shutterstock.com)

On Friday, January 30, President Donald Trump announced his nominee to replace U.S. Federal Reserve Chairman Jerome Powell: Kevin Warsh, who served on the Fed's Board of Directors under two former presidents: Republican George W. Bush and Democrat Barack Obama. Powell's term as Fed chair ends in May.

Some economists, MS NOW host and former Washington Post columnist Catherine Rampell noted in a February 1 op-ed for the New York Times, "breathed a sigh of relief" — as Warsh "seemed pretty normal" compared to "some of the overtly partisan, sycophantic candidates for the gig."

Although Rampell described Warsh as a "dramatically better option than some of the alternatives Mr. Trump was considering," she warned, "They should not be so sanguine. Mr. Warsh's record suggests that he may soon become one of the worst economic forecasters ever appointed to the chairmanship. Plus, he may be much more partisan than his boosters hope."

Liberal economist Paul Krugman shares Rampell's concerns in a February 2 column posted on Substack, although he says she is expressing them "more politely" than him.

Krugman describes Warsh as a "political weathervane," arguing that "he's for tight money when Democrats are in power, but all for running the printing presses hot when a Republican is in the White House."

"Warsh was very hawkish in the years following the 2008 financial crisis," Krugman argues. "But he turned abruptly dovish after Donald Trump won in 2024…. Why was Warsh so opposed to easy money after the 2008 financial crisis? Initially, he argued against low interest rates and quantitative easing because, he warned, they would lead to excessive inflation. He was, however, completely wrong, and it would have been a disaster if the Fed had followed his advice."

Although Krugman acknowledges that Trump could have made a worse pick for Fed chair than Warsh, he is far from enthusiastic about him.

"Given this history, why have so many established economists rushed to say nice things about Warsh?," Krugman writes. "Well, I'm an economist too, and we're supposed to think about incentives. Imagine yourself as a policy-oriented economist who tries to have contact with and influence over policymakers. Do you want to risk making a bitter enemy out of the next chair of the Federal Reserve? I'm personally wondering how I'll be greeted at some of the conferences I'm supposed to attend over the next few months."

Krugman adds, "Still, readers deserve to be told the truth. Warsh might surprise us all by showing unexpected integrity, but don't count on it. He may be better than the alternatives, but that's a very low bar, which mainly tells us how sorry a state economic policymaking — actually, policymaking of any kind — has reached in the age of Trump."

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