According to Ivan, there’s nothing new about our banker-in-chief being the partisan tool of our commander-in-chief:
But whatever Bernanke’s own personal motivations may be, free from or encumbered by political inclinations, the transformation of the Fed since the late 1970’s makes any genuine encapsulation from the gravitational draw of partisanship impossible. Originally created with the singular mission of price stability, or the preservation of the dollar’s value, Congress amended the Fed’s mission in 1977 to encompass a dual mandate: they are now charged to “promote effectively the goals of maximum employment”. Let’s leave aside the problem that these two goals potentially conflict with each other, the tools for securing one ineffective in the service of the other. The more pressing problem is that the dual mandate added fiscal policy to the Fed’s jurisdiction over monetary policy, charging it with goals that are necessarily political in character. Also, the addition of employment to its purview planted the now sprouting seeds of mission creep: in 2007, Frederic Mishkin, then Governor on the Fed’s Board, claimed a shockingly aggrandized scope for the agency, tasked with the “ultimate purpose of fostering economic prosperity and social welfare”. This is a far cry from a narrowly defined purpose, designed so amorphously it would predictably, even necessarily expand over time.
The Fed’s clumsy incursion into the market will forestall real legislatively directed economic reform, kicking the can of responsibility yet further down a dark road, that leads to pulverizing debt and long term economic languor. We know what this place looks like; it looks like Greece. Whatever rabbit Bernanke can still yank from his hat of monetary tricks is illusory–the best QE3 can achieve is the mirage of “wealth effects”, the artificial high that is closer to momentary intoxication than to stable contentment. Another tranche of easy money will only mimic economic growth, the cheap and ephemeral satisfaction of drug induced hallucination, not create it. Real wealth will only result from sound fiscal, not monetary policy: the lowering of marginal tax rates, the elimination of unwieldy regulation, and the trimming of a corpulent government bureaucracy.
Whatever Bernanke’s motivations may be, the essential problem is that the question of his objectivity must be raised at all, and it must, because the Fed is no longer a non-political entity, though it still enjoys protection from the accountability any political agency should bear. Whether he likes it or not, Bernanke just pledged what will likely amount to a trillion dollars of taxpayer money to Obama’s reelection, thereby impacting not only the economy, but potentially immigration policy, the next Supreme Court nominee, education, and even more urgent determinations, like questions of war and peace. In exchange for powers so consequential, he should have to answer to Congressional oversight, to the consent of the people. Or better yet, he should stick to monetary policy.
So Romney, of course, should try, following our Jim’s lead, to call out the president on this unaccountable stimulus package for his reelection.
Obama, of course, will resent loudly the impugning of his and Bernake’s motives. He’s really good at that. Romney’s the partisan, not me! I’m the president and I have a job to do.
Then the savvy will add that that’s what incumbents do. It’s just good politics. If there’s a problem, it’s with the system, not with this president.