The Republican criticism of the Fed and of Bernanke -- himself a Republican,
appointed by George W. Bush -- seems grounded more in politics than in
policy. Nothing about quantitative easing was obviously objectionable to
Republicans, at least in the past. Conservative luminaries like Nobel
laureate economist Milton Friedman have prescribed it to counteract
similar conditions. But sincere or otherwise, the recent attacks have
Now the only question is how far Republicans will carry them.
important indicator will be who is chosen to lead the House
subcommittee that oversees the Fed when Republicans take control of the
House of Representatives in January. First in line for the job is
Representative Ron Paul of Texas, the libertarian renegade Republican,
frequent presidential candidate, and outspoken critic of the Federal
Reserve who wrote the best-selling polemic, "End the Fed.''
he to assume the chairmanship, Paul would represent an altogether
different type of critic: he really means what he says. But he's no lock
for the job. His views on monetary policy, and his disinclination to
defer to the GOP leadership, have twice before led his own party to
ignore his seniority and deny him control of this subcommittee, in 2003
and 2005. One acid test of whether the Republican Party is serious about
trying to aggressively influence monetary policy and thwart QE2 is if
it finally lets Paul loose on the chairmanship.
Paul expects it will. "I'm assuming that I'll get it,'' he said. "I've had no indication at all that I won't.''
Barney Frank, the outgoing chairman of the Financial Services
Committee, agrees. "I think the GOP is afraid to deny him that
chairmanship. The Tea Party would revolt."
he does get it, Paul says that he will indeed go after the Fed, whose
current strategy he considers to be "insanity.'' This would add the
force of a major House subcommittee -- with investigative and subpoena
powers, and able to hold hearings -- to the anti-Fed campaign, which
would surely roil the markets and further interfere with the struggle to
engineer a recovery.
stance toward the Fed is no different than it was in 2003 or in 2005.
What has changed since then is that many other Republicans are now
singing from the same hymnbook. That's significant because until very
recently, the Republicans worshiped Federal Reserve chairman Alan
Greenspan and dismissed Paul as someone whose economic views were so far
outside the mainstream as to make him an embarrassment.
not anymore. One measure of the Republican Party's dramatic shift to
the right on economic policy is that those differences have all but
disappeared. "If other Republicans want to target QE2 then obviously we
should do it,'' Paul said. "Dealing with QE2 is a great idea because
that would be a takeoff point for looking at the big picture: should the
Fed be able to monetize debt? Should it even exist?''
Joshua Green writes a weekly column for the Boston Globe.