StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

GOP To Fed: Let Economy Fail

20 Sep 2011
Posted by Stan Collender

The headline above is not what GOP congressional leaders actually said today to Federal Reserve Board Chairman Ben Bernanke, but they might just as well have used that precise language in the letter CNBC reports they sent to the Fed.  According to CNBC, the letter instructed the Fed "to refrain from further 'intervention' in the economy.

In other words, now that the GOP has made it all but impossible for fiscal policy to be used to improve they economy, they want to make sure that the only other tool the government has at its disposal -- monetary policy -- isn't used either. 

Why take on the Fed?  The Republicans have some direct control over fiscal policy because they can either refuse to consider a proposal in the House where they are in the majority or can filibuster legislation in the Senate where they are in the minority.  Because the Fed is an independent agency, the GOP can only do what they did today in the letter by threatening to bring down the wrath of god if it dares take any action to get the economy moving.

If you're surprised by this you haven't been reading CG&G.  I first posted back in August 2010 that Bernanke had "painted a big bulls eye on the Federal Reserve" when he spoke at the annual conference in Jackson, Wyoming, about the Fed providing additional stimulus if the economy needs it.  My exact words were:

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.

Three months later, I referred back to that exact post when a number of GOP economists and political strategists began to criticize the Fed exactly as predicted.

Today's letter is far worse than anything that happened last November.  This warning is directly from the Republican congressional leadership instead of just outside economists and strategists, and the letter is almost sinister and ominous in its tone.  The treat that terrible things will come to those who help the economy when the GOP is not in charge of the White House sounds very real.

My question: If Rick Perry -- one of the wanna-be GOP candidates for president -- says that Bernanke's actions to date have been treasonous, what do you call today's Republican demand that the federal agency with the legal responsibility and the potential power to help GDP grow and unemployment to fall not do anything to help the American economy?

BS is the mildest term I can think of for this situation. 

The GOP *wants* to destroy

The GOP *wants* to destroy the economy, because that will destroy all faith in the federal government, and then they will be able to destroy the federal government. The greedy billionaires thought they could control this monster they have created, but it looks like things are getting out of hand. The GOP has become a death cult. The only end game is either the destruction of the GOP as a national party or the destruction of the federal government.


It's a horrible but entirely unsurprising development. The Republican Party has been on this trajectory since at least since the 1994 election.


"since the 1980 election" there, fixed.

Stan says: Because the Fed is

Stan says:
Because the Fed is an independent agency, the GOP can only do what they did today in the letter by threatening to bring down the wrath of god if it dares take any action to get the economy moving.

What a joke; John Boehner and his crew want to prevent QE3 because they believe it might actually work.

If the Republicans are smart they'd be wise to heed the words of Napoleon Bonaparte: "Never interrupt your enemy when he is making a mistake."

The problem with scorched earth policies

The problem with scorched earth policies is that if they "work" (i.e., get the GOP elected) then they result in at best a Pyrrhic victory. If the GOP takes the WH and Congress, how long do they think they have to turn the economy around before they get booted? Would it even be possible for them to turn it around without resorting to monetary and fiscal stimulus? This seems to be an extremely shortsighted strategy that's unlikely to produce the outcome they desire.

They've got a plan for that too

They've got a plan for that too - it's called VOTER SUPPRESSION. It's already started in some states (amidst never-substantiated cries of "voter fraud") and some of the teahadis have flat-out admitted it - for instance, TPN president Judson Phillips has stated that only property owners should be able to vote, and Matthew Vadum over at the American Not-Thinker has called allowing the poor to vote "un-American" and registering them "handing out burglary tools to criminals".

Or in other words

One person, one vote, one last time. It's not just the economy that has a 1930s look these days...

I guess the idea of an

I guess the idea of an independent central bank is too complex to get the non-geek media excited.

Starving the beast is a strategy and I'm not sure it's a bad one

A not insignificant portion of the population no longer trusts the government, and are tired of being overruled by it. and they are using this opportunity to discipline the bureaucracy.

This is democracy in action. And I'm not sure I don't agree with it.

The conflict of visions is not possible to resolve through compromise. We need to devolve the union.

finally someone agrees with

finally someone agrees with me...

blue states rebuilt the south, rebuilt the dust bowl,

forced integration and have subsidized rural red states

ever since....we can simply no longer afford to carry

the rural red-state gop theocracy on our backs....

Hear Hear

Totally agree with this; and, that other nation will learn fiscal responsibility once they're free to pray in school and retell jokes in poor taste. Win-win thru tough love. Let's do it.

Starve the Beast Does not work only because

Starve the Beast Does not work only because the Democrats have set up entitlements to expand and keep adding more ways to go broke. Obama has added to problem with Obamacare and his Tax cuts on middle and lower income class.

I'm sorry...where did

I'm sorry...where did Medicare Part D come from? Oh yes, Big Govt Republicans while they occupied the WH and Congress. Stop blaming the Dems for things that the Republicans did. Dems have stupid ideas. Republicans are just plain thieves.

Social Darwinism

For the GOP -- or at least the forces who are providing the impetus for the modern GOP -- it's all about one thing: delegitimizing the very notion of government as an actor within the economic life of a nation. It's Thomas Frank's Wrecking Crew. "The people" have no economic rights in this narrative, the goods and rewards merely go to those most willing to be the most acquisitive, the most rapacious about wealth, any notion of a social contract (or "the General Welfare") be damned.

Reply to Social Darwinism

I find it ironic that those who believe in Social Darwinism for the most part don't believe in Darwin.


Social Darwinism

Your comment is right on. I have made it a personal goal to get everyone I can to read "The Wrecking Crew". The GOP is truly evil, the marketers of "me-first-ism".

First, the GOP leadership was

First, the GOP leadership was very wrong to send the letter.

But assigning malevolent motives is equally wrong. What evidnece is there QE2 did anything to promote growth or reduce unemployment? None. The unemployment rate went UP. GDP growth combined for the first two quarters of this year DECLINED to less than 1%.

The dollar declined. Gold soared. Oil soared. And savers were punished with interest rates barely above 0%. CPI and PPI appear to be poised to break out to the upside. The people hurt the most by QE2 were working class people who saw food and energy prices rise, and the elderly who are earning nothing on their pensions because of these absurdly low rates.

Another irresponsible partisan post and headline from Daily Kos, er, uh, I mean the hacks at Capital Gains and Games.

I know you won't believe me, but ....

... it needs to be said anyway: The overwhelming consensus of professional economists, not to mention the assessment of the non-partisan CBO, is that the various tactics taken by both the Obama administration and the Fed in 2009 helped avert an even steeper decline in unemployment and GDP.

Gold soared because that's what happens in the wake of recessions: Investors look for safe havens in commodities. (Glenn Beck's paid promos for the Goldline probably didn't hurt, either.) And the dollar declined more under the Bush administration than it has under the Obama administration.

Facts don't lie, but biases don't rely on them anyway.

"What evidnece is there QE2

"What evidnece is there QE2 did anything to promote growth or reduce unemployment? None."

The Fed's tools are for managing the financial system, no matter what their 'mandate' may say. That's why what you say is correct.
However, the responsibility for the things you mention falls to fiscal policy which falls directly to Congress... which has adopted a role that is anti-action and basically anti-recovery. Their clear intention is to do whatever damage they can do and then point the finger elsewhere (ie: to the Fed, to the Executive branch, to Social Security, name it...).

What evidence?. There is

What evidence?. There is plenty of evidence. If you study the numbers you can easily see that things could be much worse. Yes, QE2 helped. Now, to understand that you need to do your homework and evaluate the data trying to keep an unbiased mind. Of course, if you are going to just repeat talking points like the ones in FOX you will never admit it. QE helped and the stimulus also helped. The numbers also show that more was needed but that is another topic.

but it's also easy to see

but it's also easy to see evidence in the numbers that QE2 created inflation. Unless one's view is that the massive commodity spike that aligned perfectly with QE2 was an unrelated coincidence of tragic proportions, then you have to concede that it's at very best something of a mixed bag.

A lot of economists sort of have the view that "oh, inflation raises both wages and prices so it's just a wash and we shouldn't worry about it." But this is manifestly not a true thing. Prices are going up, especially so for the poor; wages are not, particularly for the poor. I hate conservative/republican ideology, yet at the same time I don't know what to make of left-leaning economists' inability to have an even remotely honest discussion about inflation.

Punishing Savers?

This whole "we are punishing savers" through low interest rate policies is wrong. Presumably, those that have been saving all along have put their money in bonds, most likely very high grade bonds. Those bonds have soared in value as interest rates have come down. Somehow this is like saying that a policy that resulted in a booming stock market has punished investors by forcing them to buy stocks at high P/E ratios.

GOP to Fed: Let economy fail.

GOP to Fed: Let economy fail.

Fed to GOP: Shove it. With a mortgage-paper cherry on top.

Traitorous Republicans

If the intention of the Republicans is to harm the USA economy' so they can regain power, isn't that traitorous?

And why not?

GOP gets to rail against the establishment, distance itself from a federal reserve which is unpopular with just about everyone except for Wall Street, and if the FED doesn't take their advice and the economy still stays submerged, they can say SEE, we told you so.

Better remind folks that just six months ago, the GOP was squarely lodged on the third rail with a serious proposal to end Medicare.

For GOP, the worse the better

When Obama first came to office, it was well known that quite a few of their leaders publicly stated their wish to see Obama fail. And I think they have since largely worked hard toward that goa. It works to their political advantage: the worst things become, the more voters blame the incumbent (Obama). The more the incumbent gets blamed, the better it is for the GOP. In spite of all the fervent rhetoric about small government, cutting deficit, protecting job creators, etc., the bottom line is simple: implement austerity (when the economy actually desperately needs boosts), and sow uncertainty (even though the future already looks bleak). The effort aims to keep unemployment high, investment low and the general mood depressed. So the GOP could turn around and say to the voters with a straight face that Obama indeed is a failing president, vote for me, make me the president again, and I will make things better for you. It's all ruthless Real Politik, you see.

Sadly, the only hope for the actions the economy needs

May be to elect the Republicans, who may then let go of their "principles" to do the right thing for the economy so voters will think they are the good guys (of course, if they do what they claim to want, we are toast, but hope their self-interest will lead them to then permit actions to improve the economy).

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