Conservative Republican, David Frum — once a writer of editorials for the Wall Street Journal — lambasting the GOP’s latest effort to pressure Bernanke into keeping the economy down:
I’m not shocked by much any more, but I am shocked by this: the leaders of one of the great parties in Congress calling on the Federal Reserve to tighten money in the throes of the most prolonged downturn since the Great Depression.
One line in the letter caught my eye as summing up the unreality of the Republican leaders’ position:
We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy. Such steps may erode the already weakened U.S. dollar orpromote more borrowing by overleveraged consumers.
Are they serious? We are living through the most rapid deleveraging of the American consumer since the 1930s. Much of that deleveraging is occurring tragically, through the process of bankruptcy and foreclosure. Some is happening more happily, through the increase in the savings rate from the 0 of the housing boom to about 6% now.
Even if consumers wanted to borrow, credit is just not very available to the typical person right now. Some credit, for example on credit cards, is not cheap. In fact, the average APR on credit cards is scraping a record peak: 14.96%.
As anxious as investors are about US personal debt however, they are blithe to nonchalan[t] about the US public debt. Interest on that debt has sunk to record lows: under 2%.
The markets see deflation and depression, not inflation. Yet ironically this non-existent and much dreaded inflation is exactly the remedy we need to lighten the load of consumer debt.
As is, we’re looking at a continued economic slump, more unemployment, and more deleveraging via continuing catastrophic consumer default on mortgages, car loans, credit cards, and student aid. And now the GOP leadership is urging that the Federal Reserve make the catastrophe worse? To what end?
I know what the detractors will say: to the end of defeating President Obama and replacing him with a Republican president. And if you’ve convinced yourself that Obama is the Second Coming of Malcolm X, Trotsky, and the all-conquering Caliph Omar all in one, then perhaps capsizing the US economy and plunging your fellow-citizens deeper into misery will seem a price worth paying to rid the country of him.
But on any realistic assessment of the problems faced by Americans – and not just would-be Republican office-holders – it’s the recession, not the presidency, that is National Problem #1 and demands the most urgent action. It won’t be enough to save Obama if he does not deserve saving – but it may be enough to save your neighbor’s house, job, and family. Or even … your own. Republicans after all have been victims of this crisis too. It’s an hour of national emergency even more urgent and overwhelming than the aftermath of 9/11. And things may soon get worse, if the Eurozone begins to crack up, as it seems it may. This is the hour for united action against the economic crisis, not partisan maneuvering.
One longs for the days when, at least on matters of existential importance, politicians put country before party, and were Americans before they were Republicans or Democrats. Ezra Klein and Kevin Drum, among many others, concur.