Representative Paul Ryan (R-WI) is best known as a guy who wants lower taxes on the rich, steep cuts in Medicaid, and the privatization of Medicare. But he’s said that “monetary policy was always my first love” and he does a brisk side business as a hard money deflationist. My colleague Scott Keyes was at a Ryan town hall in Elkhorn, Wisconsin yesterday where he fielded a question about the Fed’s “quantitative easing” efforts and reiterated his commitment to fearmongering about inflation and keeping American unemployment high:
CONSTITUENT: Our dollar is getting so damn debased. That’s the price of oil. When the dollar goes down, oil goes up. What are you going to do about Bernanke? Now, I have to say, I didn’t watch the hearing with Bernanke two months ago. What are you going to do with Bernanke? Because that’s the other side of this coin. We’re getting cheap dollars. I understand the debt is a big problem, but these cheap dollars are hurting the hell out of us. It monetizes our debt, but it says, “okay, we’re going to inflation it.” That’s just not right. And it’s hurting the hell out of the old folks.
RYAN: I totally agree with that. Look, there is nothing more insidious, more undermining that a government can do to its citizens than to debase its currency. If you’re living on a fixed income, if your savings are denominated in dollars, which all of ours are, and you already retired, you’re the person that’s going to get hurt the worst if we have an inflation crisis. And I totally agree with that. I think QE2 has been a mistake. You can argue that it originally worked to keep interest rates down, but at what expense? What we have is the Federal Reserve creating so much more money, and when you create so much more money, you inevitably end up with inflation. Now, they think they’ve got this all figured out and that they can drive the car between the pilons going at 110 mph. What I’m basically saying is they think they can mop all this extra money up before inflation gets out of control. We’re in an uncharted territory. So when Ben Bernanke winds down QE2, Quantitative Easing 2, or the money printing, at the end of June like he says, it’s going to be interesting to see what happens. Quite frankly, I don’t know.
An accurate response to the question would have started with the observation that monetary-induced increases in the price of oil ought to be visible across all goods and services. What we’ve seen is an increase in the price of oil relative to things that aren’t oil. Monetary policy can’t make that happen.
But ignorance and misinformation aside, I’m puzzled by the lack of imagination Ryan displays with his repeated insistence that currency debasement is the worst thing a country can do to its citizens. The current government of the People’s Republic of China has mismanaged its monetary policy and consequently China is experiencing a moderate burst of inflation. In the 1950s, the government of the People’s Republic of China engineered the Great Leap Forward and tens of millions of people died in a famine.
One window into Ryan’s overestimation of inflation’s perniciousness comes from his reference to its impact on senior citizens. The thing about this is that most seniors rely on Social Security for the majority of their income and Social Security benefits are indexed to inflation. So it’s really only the interests of a minority of rich retirees whose concerns Ryan is addressing here. And the flipside, of course, is that tight monetary policy controls inflation by keeping unemployment high, thus preventing workers from seeing their wages go up. Ryan wants you to believe that adopting his Medicare privatization plan will lead to an employment boom in the United States, but there’s no way for this to happen unless it spurs looser money. Perhaps Ryan is confused about this, or perhaps his view is that the Fed should keep its boot on the country’s neck as a way of extorting budget cuts. Either way, it would be enlightening to see the Ryan-loving DC press corps push him a bit more on monetary issues.