Fearless Forecast: Senate Will Reject Trump’s Fed Nominees; China Talks Bogging Down?
Author: Greg Valliere
April 5, 2019
WE’LL GO OUT ON A LIMB and predict that neither of Donald Trump’s nominees to the Fed’s board — Stephen Moore and Herman Cain — will win confirmation. Aside from their shaky credentials, they have personal issues that some Republicans in the Senate will consider disqualifying.
IN A TYPICALLY IMPULSIVE MOVE, President Trump surprised his aides yesterday by announcing that he will nominate Cain, the former pizza executive who has not been adequately vetted for the Fed job. Even a cursory look at Cain’s history of sexual harassment allegations — and out-of-court settlements — should be a red flag; the press will have a field day with Cain’s transgressions, which drove him out of the 2012 presidential race.
MOORE’S NOMINATION IS A TOUGHER CALL, because he’s personally popular on Capitol Hill and is an articulate advocate of supply side policies. But Moore faces months of scrutiny because of an alimony/child support dispute, and an ongoing battle with the IRS. Some Senate Republicans are uneasy over this, as well as Moore’s record of staggeringly inaccurate predictions, and his intemperate call to fire Fed Chairman Jerome Powell.
TWO GREAT IRONIES: First, a decent jobs report this morning will confirm that the economy is bouncing back from a rough patch this winter, with a Fed rate hike perhaps back on the table by fall, regardless of who Trump nominates. Second, Trump had the most dovish Fed Chair in history, Janet Yellen, and he fired her — because she was an Obama appointee, and thus unacceptable for Trump, and because she doesn’t look like a Fed Chair, Trump said to colleagues; she’s too short, he complained. Now he has Powell, who Trump wants to fire (but can’t).
GIVE TRUMP CREDIT: His assertions that the Fed was too hawkish in 2018 proved to be correct, as Powell belatedly realized when the markets rebelled late last year. Trump wants easy money ahead of his re-election campaign, and he’ll probably get it, but his two nominees will encounter brutal confirmation hearings. It appears to us that Moore has only a 45% chance of confirmation, and Cain has a 35% chance — assuming, of course, that they don’t withdraw well before a Senate vote.
CHINA DEAL IN TROUBLE? We have written for months that a U.S.-China trade deal wouldn’t get signed until late spring, and now that may be optimistic, with several issues still unresolved and White House trade officials openly bickering. Trump seemingly conceded this yesterday in subdued comments in which he said there will be several more weeks of negotiations.
NO LOVE LOST: U.S. officials are still steaming over China’s trade deals with Western Europe, and while specific issues — intellectual property theft, the monopoly of Chinese state-owned companies, etc. — will eventually be resolved, Trump has thrown a curve-ball: he wants to keep in place some existing tariffs against China as a safeguard to ensure Beijing complies with provisions in a trade deal.
THE PRESIDENT INFAMOUSLY SAID during the stock market selloff late last year that “I’m a tariff guy,” and he wants to keep tariffs against China, Canada, Mexico and western Europe. Not surprisingly, this has made China leery of agreeing to a sweeping pact. This is an issue — along with the need to create a solid verification mechanism — that may bog down the talks. A final deal may not come until summer.
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