Texas governor and GOP presidential candidate Rick Perry still knows about as much about monetary policy as Sarah Palin knows about American history—or, for that matter, about monetary policy—but maybe there was a glimmer of insight in Perry’s dopey rant about Federal Reserve chairman Ben Bernanke’s treasonous plot to re-elect President Obama. Because if you cut through the mealy-mouthed Fedspeak, Bernanke’s speech on Friday at Jackson Hole reads a bit like a defense of Obama’s policies. And not just his economic policies. Bernanke, a Republican first appointed by George W. Bush, subtly hat-tipped almost all of Obama’s major domestic policies.
The news in Bernanke’s speech was his implicit argument for more fiscal stimulus, which was new, along with his implicit criticism of Republicans for their obsession with short-term spending cuts, which was not new. At a time when Obama is pushing to extend the payroll tax cut, while Republicans have suddenly decided they want taxes on workers to increase, a time when Obama is pushing to boost spending on infrastructure and research, while Republicans have linked arms against all spending, Bernanke has chosen a side, and it isn’t Perry’s side. Bernanke didn’t exactly heed calls to shout about this from the rooftops, but this is practically the Fed equivalent:
Under these unusual circumstances, policies that promote a stronger recovery in the near term may serve longer-term objectives as well. In the short term, putting people back to work reduces the hardships inflicted by difficult economic times and helps ensure that our economy is producing at its full potential rather than leaving productive resources fallow. In the longer term, minimizing the duration of unemployment supports a healthy economy by avoiding some of the erosion of skills and loss of attachment to the labor force that is often associated with long-term unemployment….Although the issue of fiscal sustainability must urgently be addressed, fiscal policymakers should not, as a consequence, disregard the fragility of the current economic recovery.
Bernanke may not have much of a future as a rooftop-shouter. But he did suggest that Obama’s “substantial” and “strong” fiscal stimulus effort in 2009 helped limit the damage of the historic housing collapse and financial implosion that preceded his presidency. In his usual impenetrable style, Bernanke implied that the GOP strategy of holding the debt ceiling hostage and threatening to default on U.S. obligations is cuckoo. And he urged policymakers to “promote research and development and provide necessary public infrastructure” in order to spur long-term growth. He didn’t use the phrase “win the future,” but you get the idea.
My point is not that Bernanke is actually trying to get Obama re-elected; my point is that they both share a reality-based view of the country; the embodiment of widespread Republican abandonment of that view is named Rick Perry. Way back in 2008, when John McCain was pushing cap-and-trade and Republicans favored an individual mandate for health care, just about everyone in Washington agreed that severe slumps call for stimulus. John Boehner and Nancy Pelosi cut a stimulus deal. But that seems like a very long time ago.
It was never a secret that Bernanke and Obama are both Keynesians. But on Friday, Bernanke also gave a vote of confidence to the “substantial program of financial reform” that Obama pushed through Congress last year with very few Republican votes. And this was definitely new:
Our K-12 education system, despite considerable strengths, poorly serves a substantial portion of our population. The costs of health care in the United States are the highest in the world, without fully commensurate results in terms of health outcomes. But all these long-term issues were well-known before the crisis; efforts to address these problems have been ongoing. These efforts will continue and, I hope, intensify.
Did the Republican Fed chairman just endorse Race to the Top and ObamaCare? It kind of sounded like he did—and that he hopes the reforms will continue.
To recap: Bernanke wants more short-term stimulus—including spending on infrastructure, research and workforce development, which are Obama priorities that the GOP hate—as well as long-term deficit reduction. He’s bullish on financial reform, health care reform and education reform. He’s opposed to short-term austerity, and he hates the idea of playing chicken over the debt ceiling. His stirring conclusion said it all: “Four more years!”
Oh, wait, his stirring conclusion was actually: “The Federal Reserve will certainly do all that it can to help restore high rates of growth and employment in a context of price stability.” Perry is correct that high rates of growth and employment would boost Obama’s chances in 2012. He’s probably also correct that Bernanke would prefer a second Obama administration to a Rick Perry administration that would stock the Fed with inflation maniacs. But Bernanke is going to try to promote growth and employment no matter who is President. How exactly is that treason? Perry’s the one who seems to want the American economy to remain in the tank.