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How About “Stop 10 Percent Unemployment Ben?”

By Matthew Yglesias  

"How About “Stop 10 Percent Unemployment Ben?”"

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The Progressive Change Campaign Committee is trying to do an action labeled “Stop Bailout Ben” around Ben Bernanke’s upcoming confirmation vote. Unfortunately, they’re organizing around what really amounts to a side issue—the lack of full transparency and accountability about the ultimate recipients of funds from some of the Fed’s credit easing programs. If people want to give Bernanke a hard time about this, then fine, but it makes much more sense to give him a hard time about his apparent contentedness with a monetary policy that is going to fall far short of the Fed’s legal mandate to maximize employment.

Some observers think that there’s nothing more Bernanke can do to fight unemployment, which I don’t think is correct, but even if it is correct (or even if it’s merely a correct description of Bernanke’s beliefs) then like Ryan Avent I’d like to see Bernanke made to spell this out:

I don’t need to see Mr Bernanke’s head on a pike, but I would very much like to know what the justification is for actively fighting dormant inflation while unemployment continues to rise. And if the Fed would answer that it believes it is powerless to do anything more, then there is no reason Mr Bernanke couldn’t call on the government to help it achieve more through fiscal policy, promising that he would not use monetary policy to offset fiscal stimulus. Given the disinflationary pressure in the economy, Mr Bernanke would be doing a poor job as Fed chairman if he failed to say as much.

Right now the economy is stuck on a high-unemployment trajectory and a political deadlock. There are two ways I can see out of that deadlock. One would be the for Fed to change its approach (attempt to alter expectations of growth and inflation, try to get banks to reduce excess reserves, etc.) and the other would be for George W. Bush’s top economic adviser and designated Federal Reserve Chairman to say he’s done all he can and advises more aggressive congressional action. Past Fed Chairmen have not hesitated to comment on fiscal policy, so nothing is stopping Bernanke from doing the same.

If the confirmation hearings turn into a series of skirmishes about transparency, you’ll just get answers about independence and it’ll be a wasted opportunity. Tough questions about the state of the labor market, by contrast, could really accomplish something.

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