Some GOP critics are especially incensed by what they see as Bernanke’s betrayal of President George W. Bush, who nominated him. They say that he shouldn’t be “printing money” to pay for a Democratic president’s reckless fiscal policies. What’s more, Bernanke launched the ambitious QE3 just two months before the presidential election. On Nov. 7, U.S. News & World Report ran a column headlined, “How Ben Bernanke Helped Obama Win,” voicing a common GOP sentiment.
More substantively, Republicans say the Fed has now fired all its ammunition. “It’s time to face the reality that we have reached the limits to anything monetary policy can do to help the economy,” House Financial Services Committee Chairman Jeb Hensarling, R-Texas, said in statement this month. Or, as Marvin Clark, the managing principal of Monsoon Wealth Management, wrote of QE3, “The nominal effect is tantamount to pouring a third cup of Starbucks coffee down a drunk to sober him.”
But Bernanke doesn’t see it that way. The bank pledges to continue buying bonds every month and to keep the federal funds rate down until joblessness falls to 6.5 percent, meaning it clearly believes it has more ammunition and that failing to fire it would defy the legal mandate to maximize employment. And so Bernanke is moving ahead with his efforts to revive the economy, undaunted.
J.D. Foster, an economist at the conservative Heritage Foundation who served in George W. Bush’s Office of Management and Budget while Bernanke was at the Council of Economic Advisers, offers a hypothesis to explain why the Fed chairman can steam ahead amid the criticism: He cares so much about the plight of ordinary Americans that he’s willing to take certain macroeconomic risks. “Here you have a fellow from a small town in South Carolina,” Foster says. “He sees millions of Americans unemployed. He sees lingering unemployment, economic pain across the country.… In his judgment, the risks that I’m so worried about can be contained and he can make these people’s lives better without risking inflation.”
Bernanke certainly hinted at this philosophy just after he assumed his post. He had returned home to Dillon, S.C., in 2006 to accept the state’s Order of the Palmetto. He spoke of his childhood, working at the family’s drugstore, playing saxophone, and attending the small local synagogue. And he pledged to remember the people in his work in Washington. “I try not to forget what underlies all those data: millions of Americans working hard, trying to better themselves economically, struggling to manage their family finances, and worrying about the price of gas and college tuition,” he said. “I take my work extremely seriously because I know that, if my colleagues at the Federal Reserve and I do our jobs right, we will help our economy prosper and give more people the economic opportunities they seek.”
In other words, Bernanke is going to do the job Congress gave to him, and, darn it, he’s going to do it. If members of Congress don’t like that, they should change the law—which, he is careful to point out, is their prerogative. Until then, he will do what he can to combat high unemployment.
Bernanke probably has just 11 more months to bring his critics around. The chairman’s second term expires next January, and people close to him believe he is tired after seven defensive and turbulent years at the helm.
Potential candidates to succeed him include Fed Vice Chairwoman Janet Yellen; former Treasury Secretary Timothy Geithner; former White House economic adviser and ex-Treasury Secretary Lawrence Summers; former Fed Vice Chairman Roger Ferguson; and White House chief economist Alan Krueger. Yellen, at least, has been explicit in her focus on the unemployment side of the Fed’s dual mandate. But no matter who gets the nod, the debate over Bernanke’s unconventional job-maximizing tools will rage on.
And that, perhaps, is the biggest difference between Bernanke and Volcker. Circumstances demanded that both men worry more about one of the Fed’s two missions. Both hunkered down through the onslaught. And both had to await posterity’s judgment. Volcker’s canonization began in the mid-1980s, during his second term as chairman. But Bernanke must keep waiting. It could be years before we know whether he was the goat who spurred an asset bubble and set the stage for inflation—or the dogged economist who, like Volcker, guided America through the dark.
This article appears in the March 2, 2013, edition of National Journal as No Good Deed.