Well, This Is More Like It...
Economic Downturns, the Social-Darwinist Waltz, and the Navigation of the Starship Asgard

About Three--or Is It Four?--Decades Late, But Welcome All the Same...

David Frum

Time to Downgrade the Journal’s Editorial Page: I’m uncomfortably aware that critiquing the Wall Street Journal editorial column is a job reserved for himself by The New Republic’s Jonathan Chait.... [But] in Chait’s absence, the Journal has launched an attack on Ben Bernanke and the Federal Reserve that is not only remarkable in its brutal mishandling of fact – but also for its possibly lethal intellectual consequences within the conservative world. Precisely because conservatives (rightly) hesitate to use aggressive fiscal policy to fight recessions, it is all the more urgent that we appreciate the reach of monetary policy. If we are pushed by ignorance or passion into a wrongheaded monetary policy, then we will have no answer whatsoever to the question: how do we create prosperity and employment in the near term?

So let’s go line by line through the Journal’s misinformation:

All the world’s right-thinkers are denouncing Rick Perry for suggesting this week that Texans would get “pretty ugly” with Federal Reserve Chairman Ben Bernanke if he guns the money supply any more between now and the 2012 election. His poor choice of words aside, the Texas Governor is right to put monetary policy front and center in the 2012 Presidential debate. Let’s stipulate that Mr. Perry, in his first week on the Presidential stump, was wrong to use the words “almost treacherous, treasonous” in referring to Mr. Bernanke.... [E]verybody knows Mr. Perry meant no literal harm and was indulging the irrational exuberance that is one of his trademarks.... The real news isn’t the rhetorical gaffe but the substance and politics of Mr. Perry’s demarche. Here we have a Presidential candidate, a Texas populist no less, laying out a position in favor of sound money...

This is all good partisan fun, but it does raise an interesting question: In what sense is Rick Perry a “populist”? As Andrew Gelman has exhaustively and I think decisively demonstrated, Texas Republicans are elected with the votes of the state’s richest people, not its poorest.... The Republican governor is being backed by at least six Super PACs. The key group, called Make Us Great Again, has the closest ties to Perry and is expected to be a multimillion-dollar operation that will run ads to back him. It was set up this month by Mike Toomey, an Austin lobbyist and an ex Perry chief of staff. It will also benefit from the fundraising muscle of G. Brint Ryan, the CEO of a Dallas tax firm who with his wife has donated $563,000 since 2001 to Perry’s campaigns....

Back to the Journal editorial:

The media trope of the week is that Mr. Perry is George W. Bush only more so, but he clearly isn’t the same on monetary policy. Mr. Bush, who first appointed Mr. Bernanke, was an easy-money, weak-dollar President. He and his former economic advisers still don’t understand how Alan Greenspan’s policies at the Fed contributed to the credit and housing manias that led to the financial meltdown that caused the GOP’s political undoing in 2008...

Do you see a dramatic departure [in the size of the monetary base] from the historic norm between 2002 and 2007? I sure don’t. So what’s the Journal talking about?...

Nobody – literally nobody – suggests that prosperity can be conjured from printing presses. The question before us is: what to do in the face of the worst economic collapse since the 1930s?... In 1934 as in 2009, an accommodating monetary policy can mitigate the crisis and open the way for the drivers of longer-term growth to resume operation. Milton Friedman got that two generations ago. Almost every working business economist on the planet gets it today.

It’s in the next paragraph that the Journal editors shift from misdirection to disinformation:

The Texas Governor has a better insight into middle-class economic anxiety than do most Washington-Wall Street elites. Americans intuitively understand that their after-inflation incomes haven’t risen for a decade. Even when incomes rose during the growth years from 2003-2007, the gains were undermined by the rising cost of housing, as well as by rising food and energy prices.

Wow. I mean truly: wow.... I remember when it was fighting words to point out that the median income actually declined between 2000 and 2007. Back then, we were supposed to believe that the Bush tax cuts had let loose a cascade of prosperity across the land. Now – poof! – the Journal has vaulted to exactly the opposite side of the position it vehemently upheld for half a decade....

Back when the Journal wanted to argue that incomes really had risen handsomely in the Bush years, its favorite trick was to aggregate wages and benefits. That made a nice-looking chart, even if it begged the question: “Am I really better off if my employer has to pay twice as much for knee surgery?” So possibly they have some compunction now treating the rise in healthcare costs as a bug rather than a feature. More plausibly: as improbable as it is to blame the Fed for the surge in oil prices after 2002, it would just utterly flunk the laugh test to try to blame the Fed for the increase in health costs. So down the memory hole with that...

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