Must-Read: Mark Thoma: Where Fed’s Critics Got It Wrong in GOP Debate
Must-Read: After being wrong for eight straight years, critics of expansionary macro policies in a high-slack low-inflation economy–those who say that fiscal stimulus is sugar, and monetary expansion is opium–have not only not rethought their positions, but have taken over economic policy, in rhetoric at least, everywhere in the Republican Party. Can somebody please tell me what is going on?
Where Fed’s Critics Got It Wrong in GOP Debate: “The Federal Reserve was instrumental in easing the impact of the Great Recession…:
…So it has been disappointing to hear Republican presidential candidates bash the Fed in their debates and on the campaign trail… blamed… income inequality…. [But] ould inequality be lower, on average, if the unemployment rate were 8 percent instead of 5 percent and if millions more were unemployed?… The Fed is also accused of playing politics by keeping interest rates low…. Republicans criticize the Fed because its low interest rate policy supposedly hurts the economy, yet somehow the central bank is keeping interest rates [artificially] low to help the economy [and thus the Democrats in office]? I am not impressed…. The Fed is keeping interest rates low because that’s what economic conditions demand…. And don’t get me started on the proposals to return to a gold standard….
It’s a bit irksome to hear Republicans, many of whom are in Congress, spouting on about the Fed’s poor policy when they are the ones who endorsed a policy mistake in pursuit of political and ideological objectives. The Fed did what it needed to do. Republican lawmakers didn’t…. The next time you hear Republicans call for more control and oversight of the Fed by Congress, think about how poorly Congress did with fiscal policy, and how creative and aggressive the Fed became in trying to compensate for that failure. Then ask yourself whether that is a good idea.