At Plum Line today, I posted about the Fed's decision today -- and dragged out a quotation from Romney on Face the Nation on Sunday that in my view didn't get enough play; Romney went, as I say over at Greg's, half-Paulite.
My PP piece today was about political parties, working from a wonderful Garry Wills riff about voting for the party, not the person.
And yesterday, I did a PP item that I haven't linked to yet about arguing, once again, that Republicans really have been misbehaving lately.
I really do think that Romney quote on Face the Nation is a big deal. Greg earlier today said that Romney and Ryan benefit from a "presumption of deficit hawkery," which I thought was an excellent phrase for something regular readers know I believe is true; I stole it and said that Romney also gets a presumption that he cares about economic growth, when in fact he seems a lot more interested in inflation (and, of course, tax cuts). That's not necessarily wrong -- but it is a big policy difference, and one that doesn't get reported much because I don't think it's so far from expectations that reporters don't know what to make of it, and therefore ignore it -- sort of like (as Bill James said long ago) Dick Stuart's 66 home runs.
I really liked that Mittster comment you highlighted. Personally I think its increasingly clear that reappointing Bernanke was probably Obama's biggest error. Sure moving quicker to fill up vacancies might have helped but it looks to me like Bernake is simply A incompetent as he is unable to get the Fed to address economic problems which is his job or B more concerned with his personal image among his friends, colleagues and other economists than doing his job or maybe both. Either way its pretty terrible and tells me that from a policy solution standpoint we need more built in stabilizers in our economic system if only because the elites who run our economy are simply not up to the task and shouldn't be trusted to act in our best interests as they simply don't, either in the public realm or the private sector.
ReplyDeleteI would like to point out that we know from political science literature that Presidents at least try to keep their campaign promises. So far a President Mitt looks like he would be committed to a war in Iran and a second large recession by pushing for high interest rates, these are not good things.
I read Plum Line post and its vague statement: "there's plenty that Fed could do." However, there wasn't any mention of those things the Fed can do. So I'm left wondering, what are these "things" the Fed could do?
ReplyDeleteThe Fed already loans banks at about 0% interest, so they can't really goose the banks with more money.
Maybe they should cut out the middle man and just send everyone wads of newly printed bills. But there's no precedence for doing it.
Maybe he can tell Obama and the Congress to go on a spending binge, but don't worry about the cost, because he'll underwrite it with newly printed bills, and he won't even expect to be paid back. That's a nice trick, but it's a trick that becomes inflationary if it's used too often. (And we Americans have a definite history of using crutches like deficit spending too much.)
Are these the things the Fed could do? If not, how about SPECIFYING WHAT! What isn't working here.
If you are interested in the policies the fed could be pursuing I would recommend checking out Matt Yglesias's Money Box blog or Krugman's. They have both have written a great deal about this and none of the policy prescriptions they have proposed include "sending wads of newly printed bills to people". One of the big things they could have done yesterday is set a different set of expectations. Their signal to markets was basically this: "unemployment is unpleasant but its not a problem at all and so we won't be doing anything different in the next couple of years to lower it. However, inflation that doesn't exist is a huge problem and so we won't be doing anything to lower unemployment because its conceivable that lowering unemployment could raise inflation by a small amount. In the trade off between inflation and employment this board is committed to tolerating massive unemployment for decades in order to guard against the highly unlikely chance that inflation could go up a fraction of a percent." This is essentially what they said, they could have said something different.
ReplyDeleteMy complaint about JB's Plum Line post is about the same as my complaint about your reply. Neither of you has told me what the Fed COULD DO. Instead, I have to dig up this information, and you haven't even provided me any keywords or concepts, just sources.
DeleteFurthermore, I'm not offended by the Fed's message if it reflects a reality--that the Fed can't do anything more about unemployment at this time or for the foreseeable future.
The problem is, I understand the argument that the Fed can't do anything about unemployment (interests rates currently effectively zero). However, I have yet to read a good argument that the Fed can do X, which would help unemployment. And I do mean 'do,' not 'say.'
Supporters should do a better job of making their case, because it's thin on the ground. Case in point, the absence of proposed actions here and JB's post.