A while back I wrote about the opacity of Romney’s views on monetary policy, so it’s worth circling back around given that he touched on the issue briefly in his interview on Meet the Press. Here’s the relevant portion of the transcript:
MR. ROMNEY: I mean, this– this is– this is really saying that people are having a hard time finding work. It’s very, very troubling. And of course the stock market does well in part because the indication by the Fed that they’re going to print more money, pour more money into the system, says we’re likely to have down the road high inflation. And where else are you going to go? If interest rates are going to be near zero investors have to go somewhere to protect against inflation. The stock market’s the only place to go.
GREGORY: You don’t think the Fed ought to be any more involved at this point?
MR. ROMNEY: Well, I don’t think that– that easing monetary policy is going to make a significant difference in the job market right now. I– I think what the– the nation needs is a change in fiscal policy. A– a different structure to our economic positions. And if we take the right course I believe you’re going to see this economy come roaring back, because I do believe, as you began by saying, that– that there are– many, many entrepreneurs as well as major corporations that are ready to jump, but they’re hoping to see the kind of conditions on the ground in this country, the economic conditions, the pro-business, pro-jobs conditions, that suggest it’s a good idea to invest in America again.
There are a few things worth pointing out here. One is Romney’s continued ability to talk about monetary policy without offering any hint of his guiding philosophy. His statement that easing is not “going to make a significant difference in the job market right now” is not particularly telling. Depending on how you define “significant,” I think you’d be hard-pressed to find someone who thinks that another bond-buying program from the Fed can turn the economy on a dime. Beside, he’s said before that he does think easing can work. (He called it “effective to a certain degree” in 2009.) More notable is what Romney isn’t saying: that the Fed has no business trying to affect employment, a view that his running mate holds. But he also hasn’t ruled it out.
Second, Romney’s point that fiscal policy is more useful right now is something that Ben Bernanke and Barack Obama totally agree with. Romney won’t call it “stimulus” or finger congressional Republicans as the primary obstacle to its passage, but some form of federal spending and/or tax cuts a la the Recovery Act and the December 2010 Bush tax cut deal are basically the sort of policy he’s talking about. It’s safe to assume Romney leans more toward the tax cut side of things, but if you doubt his belief in stimulus, you need only go back to 2008, when he proposed a $250 billion package, more than any other presidential candidate, and criticized John McCain for proposing austerity. (He also warned about the dangers of cutting too quickly this year.) The U.S. has been operating without deliberate fiscal policy since the end of 2010, and Bernanke does not enjoy the fact that he’s basically steering the economy alone. “I’d be much more comfortable in fact if Congress would take some of this burden from us and address those issues,” he said this year. Romney apparently agrees.
Finally, there’s this sentence to unpack: ”And of course the stock market does well in part because the indication by the Fed that they’re going to print more money, pour more money into the system, says we’re likely to have down the road high inflation.” I can’t tell whether he’s stating his opinion that high inflation is on its way if the Fed engages in further easing or whether he thinks that the Fed has already signaled to the markets to expect high inflation. If it’s the latter, Romney is wrong. As the Federal Open Market Committee put it in its Aug. 1 statement, “Inflation has declined since earlier this year… and longer-term inflation expectations have remained stable.” But either way, Romney’s flashing the kind of monetary hawkishness that’s in vogue these days on the right. The question remains whether that’s lip service or whether it would inform his pick to head the Federal Reserve should he be elected President.