Wednesday, August 17, 2011

Okay, my resolve to avoid discussing the election until the Iowa caucus has lasted about as long as it took Rick Perry to shoot off his mouth.

Let’s start with the obvious. The implied threat of violence if Bernanke ever visits Texas is just macho posturing. I no more believe the Governor of Texas intends to incite mob violence against the Chairman of the Federal Reserve than that he intends to secede. No point fainting over it.

Second, is he advocating tighter money? The general conservative line is that he is dead wrong to call for violence (even if it is just so much hot air), but right to call for tighter money. The view of some liberals and monetariests is that he is, indeed, calling for tighter money, and that he is dead wrong about that. I consider myself unconvinced.

Put me in the third category, of people who long suspected the Republicans are committing economic sabotage, but never expected them to come right out and admit it. Admittedly, Perry’s statement was somewhat ambiguous. He said:

We’ve already tried this. All it’s going to be doing is devaluing the dollar in your ocket and we cannot afford that. We have to learn the lessons of the past three years that they’ve been devastating. The President of the United States has conducted an experiment on the American economy for almost the last three years, and it has gone tragically wrong and we need to send him a clear message in November of 2012 that new leadership is coming.
This appears to be a statement that he believes we need tighter money, and that any monetary easing would be economically disasterous. No sign of sabotage there.

But he also says, “If this guy prints more money between now and the election -- I don’t know what y’all would do to him in Iowa, but we -- we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treacherous -- or treasonous in my opinion.” And, when asked if he thought the Fed's primary motive was to get Obama reelected, he said, “If they print more money between now and this election, I would suggest that’s exactly what’s going on.” Both these statements sound like an acknowledgment that monetary expansion can improve the economy and is therefore illegitimate because it might help Obama be reelected. In orther words, sabotage.

Granted, if I wanted to be charitable, I could square this circle. He could mean that the Fed mistakenly thinks that monetary expansion will help the economy (and, by extension, Obama), but that really it will be harmful. Or he could mean that monetary expansion will temporarily improve the economy just long enough to sway the election, but will do greater damage in the long run. And that latter view could explain why he regards any attempt to revive the economy before the election as illegitimate. But that seems a lot more sophisticated than the general tenure of his remarks, and I am in no mood to be charitable.

Although I regard the implied threat of violence as so much hot air, I do regard Perry’s speech as a threat. Originally I took it as a threat to Bernanke that if he tried to revive the economy before the election, he (Perry) would take it as an unfriendly act and refuse to reappoint Bernanke to the Fed after he won the election. It seemed like a hollow threat. Presupposing Perry would win the election is a case of counting your chickens before they are hatched and besides, why would Bernanke want to be reappointed to such a hot seat? But this comment convinced me that it was a more immediate and obvious threat. It was a threat that if the Fed does anything to revive the economy before the election, Republicans will regard it as an attempt to sway the outcome and denounce the Fed for being partisan. And there is nothing the Fed dreads more than accusations of partisanship.

Of course, allowing the Republicans to sabotage the economy to sway the election their way is equally partisan. And a lot less public spirited.


P.S.

Incredible! A conservative who actually gets it: "The idea that Bernanke would be playing politics by printing money between now and the next presidential election suggests that doing so would improve short-term economic growth and improve President Obama’s reelection prospects. However, if a more expansionary monetary policy would help the economy, why would anyone oppose such a policy, let alone call it treason?"

Why Perry would oppose it is obvious enough; it hurts his chances of election. Expecting a presidential candidate to want the economy to be revived just in time to undermine his prospects is asking for more public spirit than can be reasonably expected of anyone. But for him to be unable to imagine any reason for Bernanke to want to revive the economy now, as opposed to in 2013 other than a illegitimate attempt to sway the election really is disturbing. It suggests he has no concept of public spirit at all. And it arguably may be taken to imply he considers a Democratic presidency inherently less than legitimate.

See also this comment that comments like this just might, indeed, make Bernanke want to avoid a Perry presidency.

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