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Bitter GOP Criticism Of The Fed May Be Ahead

31 Aug 2010
Posted by Stan Collender

Ben Bernanke may have painted a big bullseye on the Federal Reserve when he spoke last week in Jackson, Wyoming, about the Fed providing additional stimulus if the economy needs it.

Although he wasn’t specific about what it might do and when it might do it, Bernanke clearly indicated that the Fed was ready to use the tools it had at it’s disposal to stimulate the economy given that (1) the recovery was not as robust as he thought it should be and (2) that additional fiscal policy stimulus measures were unlikely to be enacted in the current politics-of-obstruction political environment. As the minutes of its August meeting, which were released today, confirmed, Bernanke was definitely talking for a majority of the board of governors.
It’s not at all clear, however, whether Bernanke realizes that the same political pressure that has brought fiscal policy to a standstill in Washington is very likely to be applied to the Fed if it decides to move forward. With Republican policymakers seeing economic hardship as the path to election glory this November, there is every reason to expect that the GOP will be equally as opposed to any actions taken by the Federal Reserve that would make the economy better, and that Republicans will openly and virulently criticize the Fed for even thinking about it. The criticism is likely to come both before any action is taken to try to stop it from happening and afterwards to make the Fed think twice about doing more.
This will come in spite of the fact that, unlike fiscal policy changes, the actions the Fed is considering will not increase the budget deficit. The deficit has never really been the real issue; it has always been a subterfuge and an easy and convenient way to build opposition to the White House’s efforts to deal with the economy. 
The GOP should have no trouble, therefore, pivoting away from the budget deficit and using some other reason for the Fed not to act. This might include a constitutional challenge to the Fed itself, a demand for Ron Paul-like legislation that would give Congress more oversight over the Fed, Glenn Beck-like criticisms that a handful of unelected Fed governors shouldn’t have the ability to formulate economic policy, and pointed criticism of specific Fed governors. It’s also not inconceivable that legislation will be introduced to take away some of the Fed’s powers, with the implicit threat being that it will be considered and adopted by a GOP majority next year.
If you're not familiar with what this criticism might be, take a look at this clip from 2007 featuring Rep. Ron Paul (R-TX) questioning Bernanke:

The Fed is, of course, an independent agency. It does not rely on Congress for an annual appropriation and in some very important direct ways is immune from political retribution. But it’s not completely impervious to criticism and, given what it’s done so far on the fiscal policy side, it’s hard to believe that the GOP won’t use the tools it has at its disposal.

Flaws in Ron Paul's argument

Ron Paul says that the Federal Reserve is not authorised by the constitution. This is depressing.

The Supreme Court ruled in McCulloch v Maryland (almost 200 years ago in 1819) that the Necessary and Proper Clause allowed the creation of a central bank, because a central bank was a logical implication of the explicit power to regulate the value of money.

wish I could say you're wrong

Anecdotal evidence, but I had a conversation the other day with a prominent GOP donor in my state and he made the point that he and others are hoping unemployment goes higher and stays high until 2012. Sorry about the folks out of work, but we must bleed the patient in order to save it.

Wait. It's September now.

Wait. It's September now. The election is in November. The GOP is expected to take over at least one house of Congress. Any action the Fed takes before the election (at least, any action one can imagine this Fed actually taking) would not have a significant impact on the economy until after the election. Are you saying that Republicans are so eager to defeat Obama in 2012 that they want to make the economy worse for the whole next 2 years, even if they take over Congress and have to share the blame?

Share the Blame?

Sure. We'll see the right share the blame.

Wait. It's September now.

Yes, Andy. They are willing to make the economy worse for their own ends.

This crop of wacko Republicans are evil

Yep. Lags and all. The GOP

Yep. Lags and all. The GOP has no reason to resist more aggressive Fed policy now, if the goal is to win seats in the mid-term. If the goals is to win more votes at the next general, the GOP has a strong motive to obstruct any useful economic policy.

Yes. The presidency in 2012


The presidency in 2012 is much more important than a midterm.

They would love the economy to be devastated over the next two years. Obama will be blamed and Democrats overall will be a lot more blamed with the presidency and at least one house of congress.

Mr. Beck and the republican's fantasys.

"Unelected Fed governors shouldn't be able to effect economic policy"? Who in Beck's delusional thinking should formulate economic policy? I am never surprised by the ignorance of Beck and his minions. Beck is qualified to make a judgement call concerning the Fed governors? Given the limited thinking of Beck and most of the current crop of republican members of Congress, I'll take the Fed governors anyday.

I must have missed something ...

I guess prominent Fed critics like Alan Grayson, Naomi Klein, Yves Smith and Bernie Sanders have all turned into stark raving right wing lunatics recently.

Now that I think about it I was at a cocktail party at Newt Gingrich's house, and they were all holding hands planning the next "End the Fed" rally.

And I suppose an organization that refuses to submit to valid FOIA requests and stonewalls the American public they are supposed to serve is above any criticism.

Wake up, the Fed is a criminal enterprise that serves the bankers and no one else.

GOP, please stop

You're becoming very successful at making me like the government, because I know everything you say, the opposite is true.

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