IT’S AS IF THEY WANT TO MAKE UNEMPLOYMENT WORSE…. In times of economic distress and high unemployment, policymakers in Washington have a few options. Congress, for example, can make investments that spur growth and create jobs. Ideally, that’s what we’d be seeing more of right now, but Republicans staunchly oppose any such efforts.
With stimulus off the table, we tend to look to the Federal Reserve, which is tasked not only with combating inflation, but also with a mandate to keep unemployment low.
Republicans have apparently decided this week that they disapprove of this, too.
Criticism of the Federal Reserve intensified on Tuesday as conservative Republican lawmakers called for limiting the central bank’s mandate to keeping inflation low. They said that the Fed should stop trying to pursue the twin goals of balancing inflation and unemployment, as it has been required to do since 1977.
The Republican proposal was the latest example of the increasingly partisan antipathy toward the Fed’s decision on Nov. 3 to inject $600 billion into the economy in an effort to lower long-term interest rates.
The legislation would be anathema to most Democrats, who say they believe that low inflation and low unemployment should be given equal weight. The latest proposal appears to be gathering support among Republicans, who will control the House starting in January, but is all but certain to be blocked by Democrats if it reaches the Senate.
It’s tough to fully grasp exactly why the GOP would want this, but the rationale appears to go something like this: the Fed has intervened in the economy to help prevent massive unemployment, joblessness is still high, so the Fed should no longer try to prevent massive unemployment.
The perpetually confused Rep. Mike Pence (R-Ind.) said “the onus for growing jobs in this country should not fall on the Fed, it should fall on policy makers in this administration and in this, and the coming, Congress.”
First of all, that’s a nice idea, but as a practical matter, that’s impossible. Second of all, with unemployment as high as it is, there’s plenty of room for all kinds of institutions to try to improve conditions.
Steven Pearlstein noted today, “It’s not exactly clear how unemployed workers would benefit from the Fed’s benign neglect.”
The answer, of course, is that unemployed workers wouldn’t benefit at all, but that’s irrelevant to Republican goals. Theirs is an ideological crusade; what works and who benefits makes no difference whatsoever.