“Bernanke’s Reluctance to Speak Out Rankles Some”, reports Sewell Chan in the New York Times. And after reading the article, I too am among the ranks of the rankled:
The Federal Reserve is all but certain next week to begin a multibillion-dollar effort to coax the recovery along, but privately, Ben S. Bernanke, the chairman, worries that more is needed to turn the sluggish economy around and revive employment.
He believes that without the Obama administration’s $787 billion stimulus program, the nation would have been worse off, and that Congress needs to continue to prop up the economy in the short run. He agrees that fiscal measures to support the recovery would probably make the Fed’s unconventional monetary policy more potent.
But Mr. Bernanke has been reluctant to prominently voice those views, which were gleaned from testimony, speeches and interviews with people close to him over the last several months. His predecessor, Alan Greenspan, did not display such hesitation, advocating for the Bush tax cuts of 2001 and 2003.
So, yes, I’m rankled. And I’m especially rankled because I think Bernanke is making his own life harder than it needs to be with this approach. It’s clear that one reason some people are voicing skepticism of unorthodox monetary measures is that they see advocacy for quantitative easing as undermining the case for fiscal policy. But Bernanke believes, as do I, that QE and fiscal expansion go best together. So if he would say that clearly he would have, at a minimum, some more allies out there.
In general, I think the reluctance of fiscal and monetary authorities to talk to the public about the interplay between the two has been very costly to the political class’s understanding of the situation. For example in her March 2009 speech on “Lessons from the Great Depression” (PDF), Christina Romer first explained that monetary expansion was absolutely critical to ending the Depression and then said “A key rule of my current job is that I do not comment on Federal Reserve policy.” But given that, “In the same paper where I said fiscal policy was not key in the recovery from the Great Depression, I argued that monetary expansion was very useful” it’s obviously very difficult to draw Romeresque lessons about the Depression that involve commenting on the Fed.