The Republicans have to differentiate themselves from a president who’s moved farther right than they could have imagined. They have to differentiate themselves from each other, which has led to a constant search for base-building sound bites. At the same time, they have to be ever mindful of drifting too close to the edge of the political earth, by mouthing things that will come back to endlessly haunt them.
Consider their assault on Ben Bernanke and the Federal Reserve. Just a few minutes into the Sept. 7 presidential debate, Newt Gingrich said he’d fire Fed Chairman Ben Bernanke immediately (even though the president can’t fire the Fed chairman) and Mitt Romney said he’d look for someone new. Rick Perry previously had called Bernanke’s policies “treasonous” and said “we would treat him pretty ugly down in Texas.” Michele Bachmann savaged the Fed’s “quantitative easing” policy. Ron Paul said the Fed had been “counterfeiters.” Meanwhile Jon Huntsman called the assault on Bernanke a sideshow that takes “all of us that much farther off the ball” of creating jobs, but you have to look pretty hard to find that quote.
With the shrinking space between Obama’s slide to the right and the edge of the earth where amusing sound bites become political death traps, the Republican candidates are in very dangerous territory. Good leaders know that every battle is also about preparing to fight the next one. And here’s the challenge. Can one of these candidates win the nomination by campaigning to govern, without biting the hands of those needed to actually do the job? Can one of the Republican challengers act presidential, without getting bowled over in the withering rhetoric of the other contenders? Or has Obama inadvertently bolstered his own prospects by making it possible for his challengers to lose while winning?
Attacking central bankers has been a mainstay of American politics since the very beginning. Populists killed off two central banks in the first third of the 19th century. The old hulk of the Second Bank of the United States (1816-36) is the biggest tourist attraction in Philadelphia that no one ever visits. After thrashing Obama, it’s tempting to turn on the Fed, an entity that everyone fears but that almost no one understands.
But these onslaughts bring big risks. First, it’s bad politics. James Carville was only part right: it’s always the economy, stupid. Since Alexander Hamilton, it’s been a fundamental premise that the federal government could shape policy—and that if it could, it should. The Republicans have been scoring big points on the charge that Obama isn’t creating jobs. If one of them gets the big job, he or she will have to deliver—but whoever wins will need the Fed.
Second, it’s bad economics. Launching a presidency after having promised to fire one of the people you need most could prove pretty tough, because without the Fed the new president will find his or her policy gun full of blanks.
In days of yore (that is, the 1960s), Keynesian economists contended that we should boost federal spending to stimulate the economy when it’s lagging and rein in spending when growth picks up. We gave up on that decades ago, and the Republican field is now working to turn budget balance, all the time, into the new orthodoxy. In the next three or four years, siphoning gas out of the tank by cutting spending will make it hard for the federal government to stimulate a weak economy. In the longer run, the inescapable need to conquer our unsupportable deficit will simply take fiscal policy off the table.
That leaves the Fed and monetary policy. The power and mystery of monetary policy makes it an easy target. (Raise your hand if you really understand “quantitative easing” and its contribution to economic growth.) But caught between a restive China and a tottering European Union, no president will be able to sit back and let the free-market chips fall where they may. We did that in the late 1920s and early 1930s, and neither politics nor economics has ever been the same again. The Fed will be all we’ve got.
The Republican challengers seem to be embracing an approach to the economy that cuts taxes, slashes spending and rolls back regulations: in other words, an approach that’s hands off in favor of the free market. But no president would last more than a few seconds with that strategy. If one of these Republican candidates wins, he or she will face two voices from history. Hamilton’s proposition: If we can steer the economy, we should. And Carville’s warning: If we don’t, we lose.
Donald F. Kettl is dean of the University of Maryland School of Public Policy.
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