Is Ben Bernanke becoming a closet Democrat?
Watching Ben Bernanke testify before Congress in recent years, it’s hard to shake the feeling that this is a Fed Chairman who has been largely abandoned by his own party. Hearing after hearing, Bernanke receives steady support and praise Democrats for his efforts to stimulate a fragile economic recovery – and takes constant heat from Republicans for what they perceive as the possible dangers of low interest rates.
Many people forget Bernanke was first nominated to his current role by a conservative Republican president, George W. Bush. Bush, though he was reappointed to a second term by President Barack Obama. Bush first named Bernanke to the Fed’s board in 2002, then brought him to the White House to lead his Council of Economic Advisors.
In his recent biannual testimony on monetary policy, Bernanke had quite the exchange with Bob Corker, a Republican Senator from Tennessee. The tone of his question was immediately confrontational:
Corker: When the Fed decided it was going to stimulate a global currency war, as it did, did you embark on that thinking, well, you know, our country’s in trouble, and let’s — sort of the heck with everybody else, or did you think it would leverage the wealth effect, if you will, if everybody had a race to the bottom? I know the Fed has been really purposeful in trying to create this sort of faux wealth effect. Did you think it would multiply your efforts?
Bernanke: we’re not engaged in a currency war. We’re not targeting our currency. The G-7 put out a statement, which was very clear, that it’s entirely appropriate for countries to use monetary policy to address their domestic objectives; in our case, employment and price stability.
At one point, Bernanke told Corker plainly: “None of the things you said are accurate.”
Contrast that with the support Bernanke received from liberal Democrats like Maxine Waters:
I commend Chairman Bernanke for his leadership and bold efforts in cooperation with the Federal Open Market Committee (FOMC) to foster the conditions that stimulate lending, economic activity, and private sector job creation.
While some have expressed concerns about the potential risks involved in the Fed’s aggressive quantitative easing (QE) programs, I believe our central bank’s actions have provided critical support for our nation’s economic recovery. In fact, the Fed’s intervention may be one of the few actions protecting that recovery from some of my colleagues’ ongoing pursuit of retractionary fiscal policies.
It wasn’t helping Bernanke’s profile with his own party that he happened to deliver a very strong message that ran directly counter to the Republican line: that the short-term spending cuts known as the sequester threatened to further depress an already anemic U.S. economic recovery.
Given the still-moderate underlying pace of economic growth, this additional near-term burden on the recovery is significant. Moreover, besides having adverse effects on jobs and incomes, a slower recovery would lead to less actual deficit reduction in the short run for any given set of fiscal actions.