Douglas Holtz-Eakin probably isn’t sitting at the popular table of today’s Washington Republicans because he worked for President George W. Bush two decades ago.
In 2001-02 he was the chief economist of Bush’s Council of Economic Advisers, and from 2003-05 he was director of the Congressional Budget Office. He also was the chief economic policy adviser for Sen. John McCain’s 2008 presidential campaign, which further excludes him from influence with President Trump’s people.
These days Holtz-Eakin is president of the American Action Forum, an organization that takes a center-right stand on economic and fiscal policy issues and produces all sorts of analyses to back up its positions. He has an email newsletter every weekday, The Daily Dish, which is worth receiving if you enjoy insights about the way Washington operates.
Holtz-Eakin had a good one on Dec. 15 about something that affects all Americans, even if we don’t realize it. He wrote about Trump’s very public musings over who should become chairman of the Federal Reserve Board of Governors in 2026, and why the president is making a mistake by trying to get control of the institution that sets the country’s monetary policy.
Trump wants the Fed to reduce interest rates quickly in an effort to improve the economy. His big complaint about current Fed chairman Jerome Powell, appointed in Trump’s first term, is that Powell has reduced rates too slowly — though the counterclaim is that because inflation remains above the Fed’s 2% goal, cheaper money could lead to higher prices.
Holtz-Eakin quoted CNBC as reporting that Trump believes the Fed chairman ought to consult the president about interest rate decisions. The president said that used to be done routinely, and “I’m a smart voice and should be listened to.”
Holtz-Eakin’s response was spot on: “Fed chairs listening to the president is the exception and not the rule. Indeed, one of the most inglorious and unsuccessful eras in Fed history is the years that then-Chair Arthur Burns spent as President Nixon’s lapdog. The 1970s were a decade of prolonged high unemployment and sustained high inflation precisely because Burns worked to support Nixon’s political ambitions instead of focusing on the job.”
It’s true. Anybody on hand during the late 1960s, 1970s and early 1980s remembers the persistent inflation of those years. Those who think today’s interest rates are high should do a little research.
Nixon left office in 1974, but the economy lagged for years afterward. It took an interest rate of 21% in 1981 to get inflation under control and get the economy going again.
Holtz-Eakin also noted that Article I, Section 8 of the Constitution specifically put monetary policy in the hands of Congress — which, in 1913, delegated it to the Federal Reserve with independent safeguards. “Thank God!” he wrote. “Can you imagine Congress running monetary policy as poorly as it runs budget policy?”
He believes presidents never should be part of interest rate decisions, and this is no time to change. While Trump is sure to nominate a Fed chair who will do his bidding, Holtz-Eakin predicted that whomever gets confirmed by the Senate will be damaged by “the apparent need to swear subjugation to the president to get the job.”
The irony, Holtz-Eakin concluded, is that Trump’s quest to control the Fed is not in the president’s best interest. Markets would respect a strong and independent Fed chairman, and that would advance the president’s economic objectives. Why can’t Trump can’t see this?
