Fed Chairman Ben Bernake has created a large and interesting group of opponents to his $600 billion-plus bond-buy/money-printing (a.k.a., a second round of “quantitative easing” or QE2 for short). Sarah Palin whacked the plan, noting Germany’s concern in the process (NRO). The Chinese Communist Party and yours truly both think Bernake is making a mistake, albeit for different reasons. Still, those who have followed this blog may be surprised to see Zhongnanhai and the China e-Lobby founder on the same side.
That said, it’s Palin’s reaction that fascinates me here. Among Republican politicians, Palin is perceived as the most populist and least-policy-oriented (and she tends to revel in the former perception). For her to wade into the thickets on monetary policy is a big deal – and quite the surprise. It does, however, reflect something about the American people that should give hope to all of us.
Before QE2 set off a firestorm, monetary policy debate was usually reserved to university faculty halls and quiet corridors in Washington. To this day, almost no one who avoids being inflicted with my lectures in Macroeconomics at Germanna is aware of Alan Greenspan’s desperate attempts to spur the economy with loose money in the early 1990s. His second big money flow, in the early aughts, only garnered attention after the bubble it caused burst in 2007-8. Even Bernake’s QE1 was largely unnoticed by the American people or those they elected to govern (save Ron Paul).
Yet today, QE2 is rapidly evolving into the next major political debate – and that’s a very good thing. Credit for this can go directly to the Tea-brewers (my term) and Paul for forcing the Fed into the spotlight and showing the American people how it can basically become a super-mint for the government.
That any mainstream discussion of the American economy can expand to include monetary policy is a sign of something my economics training drilled into me: that people over time gather more information and become more informed. While we can all lament the sad decline of knowledge of American history, the fact remains that today’s average Americans are more aware of economics than their parents or grandparents were (or, dare I say, still are). What was considered too complex for even politicians to understand just a generation ago is now common fare for argument across the country. That’s a dramatic change, and one for the better.
There is one other factor in this that has been forgotten: the effect of “polarization” or “partisanship.” These have become dirty words to many (especially centrists), who prefer everyone to get along. In reality, though, bipolarization brings new issues to the floor, and new arguments. Let’s face it, without the opposition instinct that has been drilled into most Republicans by the Obama Administration, QE2 may very well have been unnoticed (or worse, the reaction of Germany, the CCP, and Brazil may have triggered a nationalistic defense of QE2). Instead, Republicans like Palin are seizing upon the longstanding but previously lesser-known arguments against easy money, and Palinistas (much like the Ron Paul backers) are giving themselves a crash course in monetary policy.
That sort of political self-education does not happen without “polarization.”
This is something we should keep in mind when we pine for the supposedly halcyon days of “consensus” politics and earlier generations: debates can be beneficial, inform the public, and yes, even wake up the political powers that be. The reaction to QE2 is the best evidence of that.
Note: It works for the left, too. For years, opposition to Bush forced the Democrats to reach for any argument they could find to oppose the liberation of Iraq. They seized upon the increasing influence of the Iranian mullahcracy, and the argument was so persuasive (because it was right) that Bush himself changed course in 2007. Iraq and America are far better off because our politics didn’t quite stop at the water’s edge.