I was talking previously about how lefty politicians need at least a working understanding of the intellectual base of policy to understand where their political fate may be decided. Just yesterday, we got a perfect example of this:
On Thursday morning, Bernanke testified before the U.S. Congress Joint Economic Committee. Republicans at the hearing were quick to criticize the Fed chairman over recent reports that the central bank might contemplate more “quantitative easing” — the so-called QE3 — to jump-start the stalling recovery. Very few Democrats, however, offered any sort of counterbalance. At the moment, most of the political pressure on Bernanke is to do less stimulus, not to do more.
“I wish you would take QE3 off the table,” said Texas Rep. Kevin Brady, the ranking Republican on the committee. “I wish you would look the markets in the eye and say that the Fed has done too much.” Similarly, Sen. Jim DeMint (R-SC) complained to Bernanke that many of the stimulative measures the Federal Reserve has taken “are giving us a false sense of security.”
But what about Democrats? The ranking Democrat on the committee, Sen. Bob Casey, merely inquired, in a neutral tone, whether the Federal Reserve was planning to take further action. Bernanke simply replied that the Fed was still contemplating the matter, and a lot depended on whether “there will be enough growth going forward to make material progress on the unemployment rate.”
So we have on one side, blinkered, philistine pig-ignorance pushing the Fed to actually hurt the economy, and on the other side, bored incomprehension. One feels like grabbing the Democrats by the lapels and shaking them. This one man has more control over the economy than the rest of the government combined, especially since more fiscal stimulus is out of the question, and therefore nearly iron control over the Democrats’ reelection prospects. They could be asking him why in God’s name doesn’t he try overshooting for once to try and generate some growth, or heaven forbid, raise the inflation target a percent or two, instead of dropping everything in a panic the second inflation approaches 2 percent.
The deeper issue here is that the idea of “political independence” of central banks has failed, and that appointing a conservative Republican to a post with enormous leverage against the Democrats’ political future was a huge mistake. But at the very least Democrats should be pushing against Republican pressure, and shaming Bernanke in public for ignoring the unemployment half of the Fed’s mandate.