Today, Time Magazine announced that its 2009 Person of the Year is Federal Reserve Chairman Ben Bernanke. Time justified the decision because Bernanke “is the most important player guiding the world’s most important economy”:
His creative leadership helped ensure that 2009 was a period of weak recovery rather than catastrophic depression, and he still wields unrivaled power over our money, our jobs, our savings and our national future. The decisions he has made, and those he has yet to make, will shape the path of our prosperity, the direction of our politics and our relationship to the world.
Time’s decision makes sense, insofar as Bernanke played a huge role in the worst recession since the Great Depression and will greatly influence the U.S. recovery going forward. And this is a critical time for Bernanke, as his nomination for a second term faces a vote in the Senate Banking committee tomorrow, and his nomination is being held by both Sen. Bernie Sanders (I-VT) and Sen. Jim DeMint (R-SC).
But with so much at stake, Time was too gentle on Bernanke, though it did note that he “was as clueless as Greenspan about the coming storm.” Time gave Bernanke a pass on the sloppiness of the various rescues of financial behemoths, including AIG, by saying “now that the fire is out, it’s easy to attack the firefighters for getting the furniture wet or holding their hoses improperly.”
More importantly, Time didn’t address Bernanke’s current refusal to address unemployment. As Paul Krugman wrote, “both the Fed’s actions, as measured by its expansion of credit, and Mr. Bernanke’s words suggest that the urgency of late 2008 and early 2009 has given way to a curious mix of complacency and fatalism.” Indeed, the Fed has a legal mandate to maximize employment and estimates that unemployment will be high for several years, but as Time reported, Bernanke “implicitly makes a case for doing nothing” more and won’t advocate for more fiscal stimulus.
The common retort is that the Fed now needs to worry about inflation, with all the money it has pumped into the economy, but Bernanke admitted in a letter made public yesterday that inflation is unlikely to become a problem. He also said during his confirmation hearing two weeks ago that unemployment is “the most difficult problem that we face right now.”
So to do nothing more to fight unemployment, while not pushing for more stimulus, would be unacceptable. Peterson Institute economist and former Federal Reserve staffer Joe Gagnon has released a plan calling for $2 trillion more in Fed easing, which would “boost GDP 3 percent or more over the next eight quarters and to reduce unemployment rates by between 1 and 3 percentage points.” U.C. Berkeley economist Brad DeLong wrote that Gagnon has “a coherent plan based on a coherent, and in my view likely to be accurate, view of the world,” which can’t be said for Bernanke.
A new poll by the Progressive Change Campaign Committee found that 47 percent of Americans think Bernanke cares more about Wall Street than Main Street, compared to just 20 percent holding the opposite view. Bernanke has the tools available to change that perception, and really earn himself the title of Person of the Year.
Update
Yglesias has more.
Update
,Atrios writes: “It’s the mandate of Time’s Person of the Year to keep us at full employment, and he failed. The failure to do his job is a major contributor to the projected deficit. Elites only care about one half of his mandate, price stability, but the rest of us care about the other part.“
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