The Federal Reserve Board will wrap up its latest meeting today and may announce a new round of efforts to boost sluggish job growth. Federal Reserve Chairman Ben Bernanke estimates that the first two rounds of so-called quantitative easing increased employment by about two millions jobs.

Republicans have consistently criticized the Fed’s QE programs, claiming that the central bank would spark inflation (even though inflation has been near-nonexistent). Many GOP’ers, in fact, have said that the Fed should ignore its mandate to produce full employment entirely, and only monitor inflation. According to The Hill, some Republicans believe that the Fed should do nothing more to help create jobs, even as they admit that such steps would be effective:

Congressional Republicans, wary of the Fed’s recent efforts to stimulate the recovery, said Wednesday that the its political independence could be jeopardized if officials embark on another round of stimulus so close to Election Day.

“It really is interesting that it is happening right now before an election,” said Rep. Raul Labrador (R-Idaho). “It is going to sow some growth in the economy, and the Obama administration is going to claim credit.” [...]

While many Republicans have criticized the Fed on economic grounds, an announcement about new stimulus — which could send financial markets soaring in the run-up to the election — is likely to bring charges that the bank has partisan aims.

“They are the ones who always say they want to remain independent. So they should consider, just how independent are they when they come out, only 50 days before the election, with this?” said Rep. Scott Garrett (R-N.J.).

The upshot of these comments is that Republicans believe the Fed can do more to help Americans suffering under still-high unemployment, but that it shouldn’t because to do so might help the Obama administration.

For several years now, the Fed has hit its inflation target while utterly failing in its mandate to reduce unemployment, even as some members of the central bank have argued for the Fed to do more. “If there’s a slowdown and you have an independent central bank, the appropriate response is to act. I think that’s exactly what we should do,” said Boston Federal Reserve President Eric Rosengren. But Republicans, for political purposes, want the Fed to stand pat, so they can continue to blast the administration’s jobs record (and block the president’s jobs bill).

On CNBC today, Carl Quintanilla asked vice presidential candidate Paul Ryan if he thought today’s disappointing jobs report would inspire a third round of quantitative easing — the monetary stimulus the Federal Reserve has engaged in off and on since the recession. Ryan replied by saying that the costs of quantitative easing “are clearly outweighing the benefits”:

RYAN: I’ve known [Fed Chairman Ben Bernanke] a long time. He and I have disagreements on these issues, but they’re respectful of one another. I think QE3 — I think QE — the costs outweigh the benefits in my personal opinion. But I think this lackluster report probably increases the likelihood… But at the end of the day Carl, all this easing is simply, in my opinion, the Federal Reserve trying to bail out bad fiscal policy. And I think the costs are clearly outweighing the benefits of this.

Watch it:

Ryan’s assessment is simply bizarre. The “costs” Ryan is referring to are presumably higher inflation rates, which he’s repeatedly warned are just around the corner ever since the Fed began using QE. Inflation has stubbornly refused to comply with Ryan’s predictions, however. Ever since the recession, it’s stayed right around the Fed’s preferred target of two percent:

And controlling inflation is only one half of the Fed’s dual mandate. The other half is keeping unemployment low. As the chart above shows, there’s been some progress on this front, but the country remains in an employment crisis.

Federal Reserve Chairman Ben Bernanke recently argued that the first two rounds of QE added as many as two million jobs to the economy. That would certainly count as a sizable benefit. Even if this is an overestimation, there’s simply no evidence of negative costs from QE that would suggest reticence from the Fed is the right course. And there are millions of unemployed Americans that suggest another crack at QE is more than called for.

During a speech Friday in Jackson Hole, Wyoming, Federal Reserve Chairman Ben Bernanke asserted that the extraordinary measures taken by the central bank during and after the Great Recession added millions of jobs to the economy. But he wouldn’t commit to doing anything more to boost the faltering recovery, even after admitting that high levels of unemployment “will wreak structural damage on our economy that could last for many years“:

Model simulations conducted at the Federal Reserve generally find that the securities purchase programs have provided significant help for the economy. For example, a study using the Board’s FRB/US model of the economy found that, as of 2012, the first two rounds of [large scale asset purchases] may have raised the level of output by almost 3 percent and increased private payroll employment by more than 2 million jobs, relative to what otherwise would have occurred. [...]

As we assess the benefits and costs of alternative policy approaches, though, we must not lose sight of the daunting economic challenges that confront our nation. The stagnation of the labor market in particular is a grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years.

Over the past five years, the Federal Reserve has acted to support economic growth and foster job creation, and it is important to achieve further progress, particularly in the labor market. Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.

This has been a consistent theme for Bernanke, claiming that unemployment will result in long-term damage to the economy, while refusing to take additional steps to do anything about it. As economist Chad Stone shows in U.S. News & World Report this morning, the Fed has utterly failed to meet its obligation to bring down unemployment, even as inflation, the other half of the Fed’s dual mandate, stays low:

Not all members of the Federal Reserve board are content with the central bank sitting on its hands. As Boston Federal Reserve President Eric Rosengren said, “If there’s a slowdown and you have an independent central bank, the appropriate response is to act. I think that’s exactly what we should do.”

Federal Reserve Chairman Ben Bernanke spent the last two days testifying before Congress on the state of the U.S. economy. During his appearance before the House Financial Services Committee today, Bernanke noted that the economy is still recovering quite slowly:

The pace of economic recovery appears to have slowed during the first half of this year, with real gross domestic product (GDP) likely having risen at only a modest pace. In the labor market, the rate of job gains has diminished recently, and, following a period of improvement, the unemployment rate has been little changed at an elevated level since January.

But Bernanke then added that the Fed is not really going to do anything about it, even though it’s mandated to strive for full employment:

In its [most recent] statement, the [Federal Open Markets Committee] noted that it was prepared to take further action as appropriate to promote stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.

This is, sadly, nothing new. As economist Chad Stone showed in U.S. News & World Report, the Fed has consistently failed in its obligation to fight unemployment:

The Economist opined that Bernanke “ought to be brimming with apologies for such a miserable performance.” Slate’s Matt Yglesias added, “it’s not that the economy is slowing down and then separately he’s considering what to do about it. Demand growth is slowing because he and his colleagues are refusing to stabilize it.”

Center for American Progress Action Fund economist Adam Hersh explained earlier this week that there are at least six things that the Fed could do to help boost the economy. Meanwhile, Republicans are actively trying to get Bernanke to swear that he won’t do anything else to spark employment growth.

Federal Reserve Chairman Ben Bernanke reacted to conservatives across the country who have pushed for a return to the gold standard today, saying such a move “would not be feasible for practical and policy reasons.” Bernanke’s answer was in response to a question during his lecture about the history of the Federal Reserve today at George Washington University.

Returning to the gold standard wouldn’t be practical because there isn’t enough gold, Bernanke said. And even if it was practical, he added, it would be disastrous from a policy standpoint, preventing the Fed from responding to drastic rises in unemployment or rapid inflation or deflation during economic downturns. Committing to the gold standard, Bernanke said, “would mean we are swearing that no matter how bad unemployment gets, we aren’t going to do anything about it”:

STUDENT: Why is there an argument — some argument — for returning to the gold standard, and is it even possible?

BERNANKE: [...] I think, though, that the gold standard would not be feasible for both practical reasons and policy reasons. On the practical side there’s just not enough gold to meet the needs of a worldwide gold standard. But more fundamentally than that, the world has changed. [...] In a modern world, the commitment to the gold standard would mean that we are swearing that under no circumstances, no matter how bad unemployment gets, are we going to do anything about it using monetary policy.

Watch it:

Conservatives around the country have pushed for a return to the gold standard, particularly since Bernanke’s Fed took sweeping monetary policy actions to combat the Great Recession. In state houses across the country, Republicans have pushed bills that would declare the dollar unconstitutional or force taxpayers to pay the government in only gold or silver. Goldbug fever also swept the Republican presidential primary, as candidates (besides long-time gold standard advocate Ron Paul) spoke at pro-gold standard events and stumped for it on the trail.

But as Bernanke noted, returning to the gold standard would have perilous consequences for the American economy. The American economy, he noted, was more prone to recessions before the gold standard was dropped, and, as with the Great Depression, the gold standard tends to make such downturns even more painful. “If you look at actual history, you’ll see that the gold standard didn’t work that well,” Bernanke said. “Indeed…there’s a good bit of evidence that the gold standard was one of the main reasons that the Depression was so deep and long.”

The Federal Reserve yesterday released transcripts from 2006 (full official transcripts of Fed meetings are released five years after the meetings occur), which shed some light on how badly the Fed misinterpreted the housing bubble. “I really believe that the drop in housing is actually on net going to make liquidity available for other sectors rather than being a drain going forward, and that will also get the growth rate more positive,” said then Fed member Susan Bies. “Housing is a relatively small sector of the economy, and its decline should be self-correcting,” added Janet Yellen, now the Fed’s vice chairman.

Dallas Fed Chairman Richard Fisher said that, “as one CEO told me, the only subject that has been more analyzed than the housing situation is the birth of Brad Pitt’s baby.” Chairman Ben Bernanke, meanwhile, predicted “at worst, an orderly decline in the housing market,” while now Treasury Secretary Tim Geithner (then president of the New York Federal Reserve) said, “we think the fundamentals of the expansion going forward still look good.”

The Fed’s perspective is perhaps best summed up by Gary Stern, then president of the Minneapolis Federal Reserve, in a March 2006 meeting:

I thought I would comment a bit more on two issues in particular—one is housing—where I wonder if the significance of potential developments might not be being exaggerated a bit. I certainly agree that changes in housing prices, up or down, feed into household wealth and through that into consumer spending. I think that’s a perfectly acceptable story. So if housing prices go down or level off, they will have that effect on wealth and potentially on spending.

But there seems to be a view that, in some sense, an exogenous pronounced decline in housing prices is possible, maybe even likely, and that this could be more devastating for the economy. It’s not that I would quibble with that story, but I would wonder about its likelihood because it seems to me more likely that housing is the tail rather than the dog in this. That is, as long as employment continues to go up, incomes continue to go up, and mortgage rates remain relatively moderate, then I would expect that we would avoid severe difficulties in housing except for a few markets that are particularly inflated at this point.

From the transcripts, it becomes clear that Fed officials thought the economy supported the housing market. But it was actually the other way around: the housing sector was supporting the economy. Meanwhile, the nation’s biggest banks had entwined themselves (via the housing market, which they were helping prop up with predatory subprime loans) to such an extent that when housing finally declined, the whole system fell apart.