Gregg Easterbrook

Only the Pope guest-hosting Saturday Night Live could top, in public-relations terms, what just happened in Washington — Fed Chairman Ben Bernanke gave a press conference, the first time a Fed chair has stood before reporters to take questions. And maybe Benedict XVI should film an Internet intro to St. Peter’s, since Bernanke just posted an intro to the Vatican of money.

And what a press conference! It began exactly on time. The mood was sedate, the questions softly spoken and polite. Bernanke didn’t take the bait when a reporter asked what he thought of “many economists” calling Fed policy ineffective; there was no snarky follow-up. Recent presidents could only dream of presiding over such a respectful press conference.

Traditionally, Fed chairs have spoken in public only to read a prepared speech — often, cloaked in mumbo-jumbo — or to present congressional testimony. Fed chairmen’s appearances before congressional committees have tended to be dominated by representatives and senators who want to hold the floor, and the cameras’ attention, as they engage in long-winded self-flattery. Sharp, concise questions of the sort asked by reporters are rare in congressional hearings.

Otherwise, Fed chairmen have cultivated an aura of secrecy, so much so that William Grieder’s 1989 book about the Fed was titled, “Secrets of the Temple“. Some believe that Fed chairmen cultivate a secretive air in order to mystify themselves; or because a high-and-mighty atmosphere helps the Fed function properly; or because they fear slipping up and revealing that they are not the super-ultra geniuses they’d like us to believe.

Now Bernanke is raising some of the curtain. Maybe he simply believes the Fed should be more accountable to the public — if so, more power to him. Asked today about ambiguity in Fed pronouncements, Bernanke replied, “the reason we use vague terminology is that we don’t know” what will happen next in the economy. He followed up later by saying he simply doesn’t know when “tightening” will occur because he doesn’t know what course the economy will take. He said “everybody who reads the newspapers” knows about the same information the Fed knows. This is admirable honesty from an institution with a tradition of pretending to be oracular.

Maybe Bernanke is raising the curtain because he fears the Federal Reserve being blamed for a role in Washington’s breathtaking borrowed-money giveaway, as enabler of the $14 trillion — and counting — national debt.

The Fed has engaged in $1.7 trillion of printing money in the last two years, insisting on the euphemism “quantitative easing.” Since the Washington red-ink tide began in 2008, the Federal Reserve has kept the federal funds rate to banks “exceptionally low,” in Bernanke’s words, below 1 percent. Banks borrow from the Fed at nominal charge and use the funds to purchase Treasury bills — providing effortless profit to banks, while giving the federal government dollars to spend that appear to come from private sources but actually are money-printing by the Fed. When Bernanke referred today to the Fed’s “highly accommodative monetary policy,” this is what he meant.

Inflation almost has to result. Indeed, Bernanke said today the Fed worries about deflation and does not want inflation at zero, rather, at a “goal” of about 2 percent. Imagine telling Paul Volcker in the early 1980s that the Fed was worried about reaching a goal of causing more inflation! Bernanke in December 2009 said it was “very unlikely” the Fed’s printing-money policy would cause inflation; the Fed reiterated this belief today, in advance of Bernanke’s press conference.

But though low inflation is wonderful — inflation hurts the average person far more than does slow growth — it’s hard to believe all this borrowing and money-printing won’t cause inflation to spiral out of hand. “To get a long-term, sustainable recovery, we’ve got to keep inflation under control,” Bernanke said today.

David Einhorn, among Wall Street’s most accomplished shorts, thinks inflation has already begun, but is being understated by federal formulas — because Washington so badly needs the Fed to keep providing nearly interest-free money. Bad as the federal deficit is now, bear in mind that even modest inflation would add $500 billion or so annually to debt-service cost on the national debt, while triggering big increases in Social Security benefits.

Probably Bernanke’s “very accommodative” monetary policy helped soften the recent recession; surely it pleased George W. Bush and Barack Obama, Bernanke’s patrons, allowing them to spend lavishly without accountability. But will there be harsh costs, as inflation and other problems, that won’t manifest until current Washington policymakers leave their posts?

After all, the Federal Reserve has resorted to emergency measures — an extended period of extremely loose money — when the national economic condition is nowhere near as bad as it’s been in the past, and when global economic fundamentals are sound (no resource shortages, no superpower conflicts, tariffs and trade barriers in decline).

If years of really loose money — almost unlimited free money to Washington and the big banks — is needed to keep the economy growing when overall conditions are positive, what arrow is left in the quiver if a genuine emergency occurs?

The Fed can’t cut interest rates any lower, doesn’t dare print any more money — it said as much today — and couldn’t be taking any greater chances with the future. The arrows have been shot and the quiver is empty. Let’s hope no genuine emergency occurs.

At least we finally have a Federal Reserve chairman willing to explain himself to the public.

Photo: U.S. Federal Reserve Chairman Ben Bernanke takes his seat prior to his first-ever news conference following a Fed meeting at the Federal Reserve in Washington April 27, 2011. The Federal Reserve signaled Wednesday it is in no rush to scale back its extensive support for the U.S. economy, while slightly downgrading its view of the economy’s recent performance. REUTERS/Jason Reed

President Barack Obama wants to increase taxes on the wealthy, and surely is correct that this must be part of any serious plan to control the national debt. Consider the case of a wealthy couple who made $1.7 million in 2010, yet paid only 26.2 percent in federal income taxes — though the top rate supposedly is 35 percent, and the president says that figure should rise to 39.6 percent. The well-off couple in question is Barack and Michelle Obama, whose tax returns, just released, show they paid substantially less than the president says others should pay.

If Obama is in earnest about wanting increased taxes on the wealthy, then he should send the United States Treasury $182,998. That’s the difference between his Form 1040 Line 60 (“This is your total tax”) and what he would have owed at the higher rate (plus limits on itemized deductions) he himself advocates.

So why doesn’t he tax himself more? The Form 1040, after all, only stipulates the minimum tax an American must pay. More is always welcome. Obama should write a check to the United States Treasury for $182,998.

Wealthy people who say the rich should pay higher taxes — Bill Gates and Warren Buffett have joined Obama in declaring this — are free to tax themselves. If you believe the top rate should rise to 39.6 percent (Obama) or 50 percent (Buffett), then calculate the difference and send a check for that amount to the Treasury. Of course no one individual doing this, even a billionaire, would have much impact on the deficit. But if rich people who say they believe in higher taxes were willing to practice what they preach, this would prove their sincerity, making legislation on the point more likely.

“The most fortunate among us can afford to pay a little more,” President Obama said last week about debt and taxes. So why didn’t he? The president is covered by his own definition of “fortunate,” since his proposal calls for higher taxes on individuals earning more than $200,000 or couples earning more than $250,000.

Compared to the tax returns of the rich generally, the president and First Lady look good. They gave $245,000 to charity in 2010, or 14 percent of their income — admirable generosity, and a better number than posted by most recent presidents and vice-presidents.

Figures from the Internal Revenue Service show that in 2008, the most recent year for which statistics are available, the wealthy paid only about 17 percent of their income in federal taxes — less than the president’s 26 percent in 2010, and much less than the official top rate of 35 percent for the bulk of a well-off filer’s income.

That the wealthy as a group are paying 17 percent of their income as federal income taxes, down from 26 percent from the wealthy as a group in 1992, is a result of the tax cuts enacted under George W. Bush in 2001 and 2003, and extended under Obama last year.

The slashing of taxes for the wealthy is well-known — but Bush’s cut reduced taxes for typical people, too. The lower part of the rate structure is now so low that in 2008, 45 percent of American households paid no federal income taxes at all, according to the Tax Policy Center. Americans as a whole paid an average of just 9.2 percent of their income as federal income taxes.

Both figures are postwar lows. The Tea Party claim that federal taxes are rising is, simply, factually untrue.

Falling taxes for average people have played as much a role in the ballooning federal debt as have falling taxes for the rich. In turn, soaking the rich cannot, alone, tame the national-debt monster.

Calculations based on IRS figures suggest — only rough estimates are possible, as tax laws can change economic behavior — that raising the amount of income actually paid as taxes by the rich from the current 17 percent to 26 percent, what the Obamas paid, would bring in about $200 billion a year in fresh federal revenues. Increasing the figure to about 30 percent (likely actual result of the tax changes Obama advocates) would raise the new-revenue total to about $300 billion annually.

Such amounts would ease the deficit, but hardly represent a cure — government red ink is projected to hit $1.6 trillion this fiscal year. There simply isn’t a long-term deficit solution based only on taxing the rich. Social Security benefit cuts, and more taxes on the middle class, will be needed too.

Sustained 5-to-6 percent GDP growth would solve the deficit problem painlessly, by raising revenue without tax increases or Social Security cuts. While such growth, roughly double the current number, is possible, it seems unlikely.

Though tax increases alone cannot put the country’s fiscal house in order, the president should set a better example on his own tax returns.

That $245,000 the Obamas gave to charity, for example — deducting it on their Schedule A reduced their federal tax bill by roughly $85,000, and cut their Illinois state tax bill too. But you’re not required to deduct charitable giving, or to claim any tax favor. Deductions and tax credits are options. If you think the government deserves more of your income, don’t claim them.

Obama said last year that itemized deductions for the wealthy should be phased out — then on his own tax return, claimed a huge itemized deduction. Until those who advocate higher taxes for the well-off practice what they preach, the national debt situation may only get worse.

The budget compromise that averted a federal government shutdown nearly foundered upon the rocks of Republican riders, one of which would have stripped the Environmental Protection Agency of authority to regulate greenhouse gases. Speaking as someone who favors greenhouse restrictions, I wish the Republican rider — dropped just before the clock struck midnight — had succeeded.

The EPA is trying to restrict greenhouse gases using a 41-year-old statute intended for another purpose. Republicans are right to object to this.

Of course, most Republicans don’t want any greenhouse gas regulation at all — though greenhouse regulation is now justified by a strong body of science, including by statements from George W. Bush’s Climate Change Science Program. Greenhouse regulation probably will not cost anywhere near as much as current estimates. All previous programs to control air emissions have proven significantly cheaper than expected. Republicans are correct, though, that the EPA is going about this in the wrong way.

Only a global warming program enacted by Congress will have political validity. A backdoor attempt — federal bureaucrats using strained interpretations of old laws, leading to solutions imposed by judges — will be illegitimate in the eyes of voters. Americans are sick of bureaucrats and judges trying to dictate policy. Laws passed by Congress, on the other hand, clearly are legitimate politically. You may not like any particular law passed by Congress — but that’s where the Constitution vests the power in our system.

Thus Congress must speak on greenhouse gases. Backdoor bureaucratic attempts will only discredit climate change action.

Here’s the fast-forward version of the current EPA controversy:

The Clean Air Act of 1970 regulates pollutants that cause smog and acid rain. The Act has been a spectacular success: smog and acid rain have declined rapidly, without harm to the economy. Indeed, the economy has mainly boomed since smog and acid rain rules became stricter; an improving natural environment may be a cause of economic growth. The Clean Air Act has strong political legitimacy, because Congress clearly spelled out the specific compounds that were to be restricted.

Congress has never enacted any regulation of carbon dioxide, the primary greenhouse gas. Frustrated, advocates proposed that the Clean Air Act be used. It contains a clause saying the EPA may impose rules on gases not named in the statute, if they are found to “endanger public health or welfare.”

Do greenhouse gases threaten “public health or welfare?” Saying they threaten public health is quite a stretch — there is no evidence of this in the United States, though it might be happening in equatorial nations. Perhaps they threaten public “welfare,” since that term is amorphous. But considering the general welfare of the United States has steadily improved during the postwar period, even as greenhouse gas accumulation has risen, this one vague word seems hardly sufficient to hang a broad regulatory authority on.

In 2003 the EPA, under Bush, declared that the health-or-welfare clause of the Clean Air Act did not apply to greenhouse gases. Massachusetts sued, and in 2006 the Supreme Court said this. Totally obvious what the decision means, right? Like many recent Supreme Court opinions, the justices’ decision could scarcely be understood by monks standing on their heads in a monastery.

Many politicians and pundits, to quote former Speaker of the House Nancy Pelosi, said the Supreme Court “ordered the EPA to impose greenhouse gas regulations.” The decision did not. Rather, the court found the EPA was wrong to assert that it could not regulate greenhouse gases. Get the maddening double negative? The Supremes weren’t definitive on whether the EPA has authority: rather, they told the EPA to go back to the drawing board and articulate a “reasonable basis” for deciding one way or the other.

When Barack Obama, who favors greenhouse rules, was elected, senators John Kerry and Joe Lieberman put together a Senate bill. It failed, and that’s good — the Kerry-Lieberman global warming bill was a nightmarish mélange of top-down controls, special exemptions and giveaways to campaign donors. (Here’s the 987-page “discussion draft”). Knowing the bill was goin’ nowhere even when Democrats controlled the House, Obama’s EPA reversed Bush’s EPA and declared that the Clean Air Act can be used to regulate greenhouse gases.

That brings us to the present. Two weeks ago, the Republican-controlled House voted to amend the Clean Air Act, to clarify that it does not apply to greenhouse gases. The Democratic-controlled Senate would not match. Then the Tea Party took the issue to the budget showdown, without success. Now it’s settled? Hardly. There’s no guarantee the EPA’s pro-regulatory finding will amuse the Supreme Court any more than its anti-regulatory finding did. Additional litigation seems assured.

This tussle has brought out absurd degrees of exaggeration from theologians of both extremes. The Wall Street Journal editorial page, representing the Church of the Perpetual Denunciation, declared that having no regulation of greenhouse gases would trigger “growth and job creation”. Wait, there was already no regulation of greenhouse gases during the recession!

Paul Krugman, representing the New Jersey Synod of the Latter-Day Limousine Liberals, ridiculed the mere suggestion that steady improvement of public health during the era of greenhouse accumulation shows greenhouse gases don’t harm public health. Wait, that makes sense! It’s 2011, must the left still shout down its critics rather than engage their arguments?

Bottom line: all three branches of the federal system (legislative, executive and judicial) have spent eight years arguing about the meaning of a single sentence in an statute. And we’re still not sure what the sentence means.

Solution: ditch the EPA’s backdoor regulatory attempt, then enact legislation to reduce greenhouse gases. Such legislation would have political legitimacy; could be simple and practical; and can be conservative!

In 1992, Martin Feldstein, who had been Ronald Reagan’s chief economist, proposed that greenhouse gases be reduced via a carbon tax. In 2007, Gregory Mankiw, who had been George W. Bush’s chief economist, proposed the same. Rather than impose some super-complex regulatory scheme with decisions made in Washington, a carbon tax would allow individuals and businesses to make their own decisions about carbon dioxide reduction — while creating a profit incentive to invent low-cost control technology. That’s why conservative economists like the idea.

The national-debt monster is looming: why not combat it with a tax on air pollution? That’s preferable to higher taxes on income or corporate profits. Taxing income and profit only discourages labor and capital, both of which are good. Taxing pollution would discourage pollution — while helping balance the books.

So Tea Party, I hope you succeed in stripping the EPA of Clean Air Act-based authority regarding global warming. Then enact the reform the country needs: a carbon tax, to reduce the deficit and protect the climate.

U.S. forces are fighting three costly, inconclusive wars; unemployment is 8.8 percent and the president’s new budget proposal would double the national debt in a mere 10 years. What a great moment for Barack Obama to declare for reelection.

Obama enters the 2012 race as the clear favorite. His poll numbers are weak but his public respect is solid; his money position is outstanding; even people like me, who think runaway federal borrowing is an error of historic proportions, admire the president. I can see myself pulling the lever for him in 2012, as I did in 2008.

Set aside zip code analysis and Electoral College positioning — what two leading indicators should give Obama pause? The decline of incumbency and the rise of third-party spoilers.

Presidential incumbency brings many advantages, not least of which is command of the nation’s attention. White House incumbents standing for reelection are 21-7 in American annals.

But recent trends matter most, and recently, incumbents have been on a mere 3-3 streak. Ronald Reagan (1984), Bill Clinton (1996) and George W. Bush (2004) were reelected. But Gerald Ford (1976), Jimmy Carter (1980) and George H. W. Bush (1992) were defeated when standing for reelection with all the powers and advantages of incumbency. Once, Americans almost always voted to retain an incumbent chief executive. Not anymore. Lately voters have been ornery.

Now factor in spoiler candidates who run for reasons of ego, knowing they can’t win. Carter lost because a third-party vanity candidate, John Anderson, siphoned off liberal voters. The elder Bush lost because a third-party vanity candidate, Ross Perot, siphoned off conservative voters. Plus, in 2000, a third-party vanity candidate, Ralph Nader, threw the election to the younger Bush, away from Al Gore, who prevailed in the popular vote.

That’s three of the last seven presidential elections swung by third-party candidates who were in the race mainly as acts of self-flattery. We live, after all, in an era in which personal promotion often trumps substance.

Right now a three-way 2012 race seems unlikely. But it’s only April 2011. In April 2007, no one was taking a certain junior senator from Illinois seriously as a presidential aspirant.

Suppose Michael Bloomberg — who was a Democrat, and then a Republican, and now is an extremely wealthy Independent — ran a vanity third-party campaign for the White House. He could gain traction as a protest vote for disenchanted Obama supporters. Mr. President, I’d appoint Bloomberg to something important ASAP if I were you.

And what of the likely opposition field? In alphabetical order:

Michele Bachmann. If this nut job gets anywhere near the Oval Office, there will be a mass migration to Canada. Democratic campaign strategists are rooting for Bachmann — she gets the Republican nomination, and the Obama reelection becomes a walkover.

Haley Barbour. A flaming hypocrite, Barbour denounces government spending yet lavishly wastes taxpayer funds on himself.

Newt Gingrich. A blazing-torch-visible-from-orbit hypocrite, it’s hard to believe even one Republican woman will vote for Gingrich, and women are increasingly important to the GOP. Not clear why any man would vote for him, either.

Mike Huckabee. A charming guy with potentially broad appeal. His current job as a cable commentator offers a lot more longevity than being a candidate.

Jon Huntsman Jr. Nobody’s heard of him. He’s an engaging public speaker who makes a fresh impression with a fascinating personal story. Sound like anyone we know four years ago?

Sarah Palin. Her grasp of public affairs is better than pundits acknowledge. But what is her substantive achievement? Palin quit on her first term as Alaska governor. Couldn’t take the pressure of even a single term running a state with one-quarter of one percent of the country’s population. Has tremendous potential for a meltdown.

Tim Pawlenty. No big negatives, which is deceptively important. Not clear what he stands for beyond his own career.

Mitt Romney. Bowled a gutter ball in the 2008 Republican nomination race, but Reagan lost the Republican nomination in 1976 then won on his second attempt. Has uncanny ability to seem phony even when he’s telling the truth.

Rick Santorum. There’s no minimum to the number of votes Santorum could draw.

The wild card:

Michael Bloomberg running as a Republican. This would require significant bridge-building with a party he theatrically resigned from. Paired with a social-conservative running mate, Bloomberg as a Republican might knock Obama from the White House.

Where’s the market opportunity in the contemporary American political marketplace? There is no prominent Roe-supporting, experienced, centrist Republican who’s gone after teachers’ unions and government-worker pensions. There will be if Bloomberg returns to the GOP.

Photo: A screen capture image from a video announcement of U.S. President Barack Obama’s 2012 re-election campaign that was launched on April 4, 2011. Obama, a Democrat who won a sweeping victory over Republican Senator John McCain in 2008 with a message of change, said in a low-key email to supporters that he was filing papers to start his re-election bid in a formal way. REUTERS/http://www.barackobama.com/