A few of the old progressives, believing that America’s real enemy was Joe McCarthy and not Joe Stalin, would protest that they were not pro-Communist, but anti-anti-Communist, if anti-Communist meant Richard Nixon and Whittaker Chambers and such. There was much dishonesty wrapped within that argument, but there was something to it. Borrowing the form, one might argue that those on the right who are sympathetic to besieged Fed chairman Ben Bernanke are not so much pro-Bernanke as anti-anti-Bernanke.
The estimable Larry Kudlow sometimes rides with the anti-Bernanke posse, and he has suggested that Helicopter Ben should consider withdrawing himself from consideration for a new term at the Fed — a term that many or most Republican senators would vote to deny him. Kudlow probably is right on the economics — Bernanke remains haunted by deflation, while the beastly mark of inflation already is faintly visible upon the forehead of the economy — but, as a purely prudential matter, Kudlow & Co. should remind themselves that the president of the United States of America is Barack Obama, and they should ask themselves if they feel comforted by this roster: Anita Dunn, Van Jones, Carol Browner. President Obama may not be every inch the radical left-wing ideologue of conservative anxiety, but he does seem to enjoy surrounding himself with them. You don’t get an Anita Dunn or a Van Jones in the government by accident. You don’t get Sonia Sotomayor on the Supreme Court by bad luck. When he is not courting ideologues, the president prefers to select knuckle-dragging enforcers (Rahm Emanuel) or yes-men (Joe Biden, Tim Geithner). President Obama has made some reasonable choices in filling key economics posts, but it is difficult to imagine that any Fed selection he might make would constitute an improvement on Bernanke, given the foaming anti–Wall Street sentiment animating his party and the foundering of his key domestic initiatives.
President Obama is more than capable of appointing a Paul Krugman type, if not Professor Krugman himself, to the Fed. And that prospect should be worrisome indeed to the anti-Bernankeists, inasmuch as the Economic Gospel According to Paul calls for the Fed to more or less ignore clear and present inflation threats and to act, instead, as a Department of Permanent Stimulus, circumventing Congress’s refusal (so far) to unleash another cataract of pump-priming appropriations. Writes Krugman: “Someone has to take responsibility for creating a lot of additional jobs. And at this point, that someone almost has to be the Federal Reserve. . . . While economic analysis says that we should have a large second stimulus, the political reality is that the president . . . probably can’t get enough votes in Congress to do more than tinker at the edges of the employment problem. The Fed, however, can do more.” How much more? Krugman calls for the Fed to buy $2 trillion worth of assets to grease the credit markets. This, he argues, would have “hardly any downside.” If Bernanke’s critics worry that he is excessively dovish on inflation, consider the likely alternatives. A full-fledged Obama guy at the Fed could do a heck of a lot more than “tinker at the edges.”
Kudlow and his fellow right-wing anti-Bernankeists are substantive critics, and their arguments must be taken seriously. Much of the criticism Bernanke has weathered in Congress is of a less serious sort. In effect, Bernanke is being preemptively scapegoated by members of both parties in anticipation of economic pain almost certain to be felt in the first two quarters of 2010. It is not entirely unfair that Bernanke’s bearded and scholarly countenance has been made the face of Bailout Nation, but it is worth remembering that TARP and much of what followed it was a bipartisan effort with broad support. Congress was bipartisan in coming together to bail out the banks, and its members are bipartisan in their flight from responsibility for having done so. Nobody wants the blame for those excruciatingly unpopular bailouts, but everybody claims credit for the period of relative calm they produced. Barack Obama, engaging in accounting chicanery that would make Charles Ponzi himself blush, credits himself for the successful interventions instituted under George W. Bush but faults President Bush for deficits incurred under President Obama and a Democratic Congress. To the extent that he is getting away with it politically, that is a bad sign for our nation, as is the new bipartisan taste for interfering with the Fed’s independence. As the bailouts’ chief engineer, Bernanke has a permanent target embroidered on the seat of his pants. But he is more likely to resist the politicization of the Fed than would a replacement selected by President Obama.