On Tuesday, House Speaker John Boehner, Senate Minority Leader Mitch McConnell, and their respective number twos sent an extraordinary letter to Federal Reserve Chairman Ben Bernanke. "It is our understanding that the Board Members of the Federal Reserve will meet later this week to consider additional monetary stimulus proposals," they say. "We write to express our reservations about any such measures."
It is not intrinsically illegitimate for congressional leadership to convey its preferences to the Federal Reserve. The Fed is protected from political interference, not from the opinions of politicians. But it is quite unusual for the leaders of a major political party to make a public, unified request of the chairman, and to ask that their request "be shared with each Member of the Board."
And let's be honest. The implication of this letter is that Ben Bernanke backs off or political interference comes next. As Bernanke knows, Boehner and McConnell have a posse. Gov. Rick Perry has threatened to "treat him pretty ugly" if he engages in further monetary easing, and Gov. Rick Perry may soon be President Rick Perry. John Taylor, the most popular monetary economist on the right, is writing op-eds saying the Fed should be stripped of its dual mandate. Rep. Ron Paul, who wants to "end the Fed," was put in charge of the House Subcommittee that oversees the Federal Reserve.
So sure, this letter isn't threatening to do anything now. It's just making clear that the Republican leadership in Congress is strongly opposed to any further attempts to help the economy. It's the subtext that Bernanke and others will find threatening: The Republican Party is unified in its backlash to the Federal Reserve, and they may well be in power two years from now. Does Bernanke really want to provoke them? Is that really a good thing for his institution?
In other words: Nice central bank you got here. Shame if something should happen to it.
Of course, if Bernanke chose to by cynical about it, the irony of this letter is that it strongly underscores the political case for easing. The worse the economy is, the better Republicans will do in the 2012 election. If the economy is really bad, a hardliner like Rick Perry, rather than a presumed moderate like Mitt Romney, becomes a likely bet for the presidency. And if the economy is really, really bad, there will be the impetus to do something, anything, to show major action is being taken. "Mend the Fed" could quickly become a rallying cry among the newly dominant Republican Party.
That suggests Bernanke would be wise to do whatever he can to help the economy, and to do it quickly. But of course, that's his job anyway. So the fact that this letter, and its implied threat to his institution, will be lodged in the back of his brain isn't going to matter either way, right? Right? Bueller?