Bernanke and the Fed Just Gave Romney a Huge Gift
The common wisdom among the punditocracy is that the Federal Reserve’s announcement of its new, open-ended bond-buying program will provide a big boost to President Obama’s reelection by juicing the stock market and economy.
Actually, however, the Fed’s monetary move could give a huge messaging boost to Mitt Romney if his campaign plays it right.
Imagine this speech by the Republican nominee:
President Obama and his fellow Democrats spent their convention down in Charlotte trying to persuade voters that the U.S. economy is on the right track, that the president’s policies are working, that no president could have done a better job with the mess he inherited, that all that could be done has been done by this administration, that we must stay the course.
But yesterday, Federal Reserve Chairman Ben Bernanke finally admitted what most folks outside Washington already knew: The economy, three years into a supposed recovery, remains in terrible shape and is unlikely to get much better anytime soon.
In fact, Bernanke said there’s such little hope for improvement that he and the Fed are going to embark on a radical new experiment in money printing in order to try and do something, anything, to boost growth and create jobs.
In short, the Fed chairman’s move clearly suggested Obamanomics isn’t working today and is unlikely to work any better tomorrow. We cannot stay the course. And since Washington won’t act, he will.
But let’s take a step back for a second and recall how we got here.
In late 2007, a collapsed housing bubble helped push America into its worst economic downturn since the Great Depression. Millions lost their jobs; millions more saw their savings disappear and salaries cut.
Now, the Great Recession officially ended more than three years ago in the summer of 2009 — at least that’s what the economists who get to decide such things tell us.
So for the past three years, we have officially been in an economic recovery. But although the economy has been growing rather than shrinking, by almost all other measures we’re still in a bad recession. Incomes are lower today than they were when the supposed recovery started. In fact, incomes have fallen faster during the recovery than during the recession itself.
And although the economy has slowly been adding jobs, the pace has been so miserably slow that unemployment has been stuck above 8% for 43 straight months, which hasn’t happened since the 1930s.
And if government number counters quit ignoring all those discouraged Americans who want a job but have given up looking, the unemployment rate would be over 11%.
For American workers, the Great Recession never ended.
Now, all those numbers I just mentioned? You didn’t hear any of them at the Democrats’ big party down in Charlotte — not from Barack Obama or Joe Biden or Bill Clinton. They also forget to mention that the president’s own economists said his policies, including the stimulus, would result in an unemployment rate this year of below 6%, not above 8%. And those same economists said the economy would be booming right now, growing at more than 4%. Instead it is growing at less than 2% — so slowly in fact, that if anything goes wrong, we’ll be right back in an official recession.
By Obama’s own standards, Obamanomics has failed. After wasting four years of precious time implementing policies that have never worked in the past, the American economy remains broken. I know it, you know it, Ben Bernanke knows it. Maybe, deep down, even President Obama knows it.
My fellow Americans, trillion dollar deficits and Fed money printing is no way to rebuild the American economy. After all, too much debt and too much cheap money is how we got into this mess in the first place.
So I propose a different way. First, we should look at what’s worked in the past.
Like JFK and Ronald Reagan, we should cut tax rates on business and entrepreneurs and small business and the middle class. And like Bill Clinton, we should reduce government spending. Cutting taxes and reducing spending will shift more resources back into the private sector where they can be used more productively than by Washington.
Second, we should look at what hasn’t worked in the past and stop doing that. Crony capitalism doesn’t work, whether it’s subsidies for pet presidential projects like Solyndra or for Obama campaign contributors like big banks. So as president, I will reform the tax code so that it promotes economic growth, not special favors and loopholes.
Third, ….
Well, Team Romney can finish the rest if it wants. This is still a close presidential race and winnable for the Republicans. But they need to seize opportunities like this one when they come along. Time is running out.
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May '10
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
James, excellent post. Romney should take the offensive, but he won't as that seems to be against his nature.
Reading this reminded me of the podcast the other day when after Pat Caddell blasted the Romney campaign, Rob, Peter, and James pretty much went back to the "Republican Establishment" of taking it slow and easy, looking at the 980K independent voters in the swing states, blah blah blah.
It's my opinion that Pat was more right than wrong. It IS Romney's to lose and this week's foreign policy predicaments notwithstanding, this is the type of hitting that the Romney team has to do, and hit hard.
I am bewildered at the complacency of being only a point or three difference here and there in the polls. With Obama's domestic and foreign policies being what they are, this should be Romney up by 1o points at a minimum.
What's it going to take to wake these guys up. Who cares what happened with Carter and Reagan or any other race before this. Each race is new.
Hit them hard. Hit them often. Show 'em what a tough CEO looks like who will look after America.
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
I know a Romney speechwriter. I'm sending this splendid post along to him now.
Jan '12
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
Ryan will talk economy; Romney will talk business.
Oct '10
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
We're too close to the election for the Fed's move to affect the economy, I think.
Feb '11
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
But it's already had a major positive effect on the stock market.
Apr '11
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
Can someone explain to me the mechanics of how QE3 would "juice the economy" enough that we would notice the difference in less than 8 weeks?
Dec '10
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
If the Romney campaign doesn't hit your tip jar for this it is filled with buffoons.
It can't. It will essentially give more cash to banks that aren't lending it in the hopes that they will. It doesn't actually remove the current disincentives that exist to lending or create new incentives.
May '10
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
And I just saw this a moment ago on Instapundit:
"Ratings firm Egan-Jones cut its credit rating on the U.S. government to "AA-" from "AA," citing its opinion that quantitative easing from the Federal Reserve would hurt the U.S. economy and the country's credit quality."
Hit 'em hard.
Jun '12
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
The King Prawn: If the Romney campaign doesn't hit your tip jar for this it is filled with buffoons.
It can't. It will essentially give more cash to banks that aren't lending it in the hopes that they will. It doesn't actually remove the current disincentives that exist to lending or create new incentives. · 19 minutes ago
In short, this is more of the same stuff that hasn't led to a robust economy yet.
Isn't there a term for doing the same thing over and over and expecting a different result?
Jun '12
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
I dunno. Your average swing voter can't tell the difference between an interest rate and a resting heart rate. Asking that person to draw a causal link between QEn and Obama is a stretch. To put it mildly. 99.99% of the population without an economics degree is just going to hear more finger pointing.
Jul '12
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
That seems like a wildly overstated assumption. My understanding is that swing voters -- or more precisely what the polls call "undecided" -- are not like you and I, reading this stuff for fun and edification. They are out living their lives, watching the boob tube, raising their families and mostly earning a living. They know there's an election coming up, but unlike Ricochetti, they haven't been pondering it, following events, evaluating the candidates. The "undecided" are going to look up from what they are doing in about 6 weeks and choose a candidate.
Most people despise politics. I despise politics. But given the importance of political questions to things I hold dear I overlook my disgust at the despicable people and press that traffic in political verbiage and learn what I can to make up my own mind, and be ready to defend my beliefs and the choices I make. That being said, most people avoid politics like the plague. That explains the high ratings for "Here Comes Honey Boo Boo" while the rest of us Ricochetti watched the conventions.
Dec '11
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
You're right. But it's not too close to affect the election. The pundits will spin it as helping the economy whether it does or doesn't. It's an action, and most people don't have the most basic understanding of what that action really is (and what it will or won't do).
Romney needs to counter with a narrative along the lines of the original post.
Jun '12
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
Last Outpost on the Right
You're right. But it's not too close to affect the election. The pundits will spin it as helping the economy whether it does or doesn't. · 6 minutes ago
However, if people don't see any tangible benefit -- and I seriously doubt they will -- they'll be even more willing to get rid of this entire gang of incompetents from Obama's Chicago Machine.
Dec '10
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
I encourage everyone to check my 2nd favorite podcast over at Coffee & Markets where the ever illuminating Francis Cianfrocca points out how QE 3 is markedly different and could well spur banks into lending.
http://coffeeandmarkets.com/2012/09/14/will-qe3-help-obama-win-in-november/
Jun '12
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
MJB Wolf
That seems like a wildly overstated assumption. My understanding is that swing voters -- or more precisely what the polls call "undecided" -- are not like you and I, reading this stuff for fun and edification. They are out living their lives, watching the boob tube, raising their families and mostly earning a living. They know there's an election coming up, but unlike Ricochetti, they haven't been pondering it, following events, evaluating the candidates. The "undecided" are going to look up from what they are doing in about 6 weeks and choose a candidate.
.... · 3 hours ago
Yes, this is the conventional wisdom. Except if those folks can't be lifted out of their somnolence by 10+% unemployment and a multi-trillion dollar debt (but who's counting) then I really don't think they're going to be swayed by a wonkish policy speech about the Fed and inflation.
May '10
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
Great Post. I would add only something about the most responsible ratings company on the planet downgrading the USA the day after the announcement and the immediate gold/silver/exchange signals following the Bernake announcement.
While this action will almost assuredly not have a big upside impact on the economy before the election - what it does ward off is a significant downside October market surprise..............maybe.
If coffee & markets is right and the velocity of money picks up, look out for the inflation coming. Those of us old enough to have lived through Stagflation will remember just how unpleasant it was. Given the size of the debt + money created, this has the potential to be much, much worse.
Sep '12
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
ConservativeWanderer
Last Outpost on the Right
You're right. But it's not too close to affect the election. The pundits will spin it as helping the economy whether it does or doesn't. · 6 minutes ago
However, if people don't see any tangible benefit -- and I seriously doubt they will -- they'll be even more willing to get rid of this entire gang of incompetents from Obama's Chicago Machine. · 1 hour ago
DJIA just hit multi-year highs. If I were an incumbent, I'd take that over sound fundamentals with two months to go.
Jun '12
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
CoveredUp
ConservativeWanderer
Last Outpost on the Right
You're right. But it's not too close to affect the election. The pundits will spin it as helping the economy whether it does or doesn't. · 6 minutes ago
However, if people don't see any tangible benefit -- and I seriously doubt they will -- they'll be even more willing to get rid of this entire gang of incompetents from Obama's Chicago Machine. · 1 hour ago
DJIA just hit multi-year highs. If I were an incumbent, I'd take that over sound fundamentals with two months to go. · 2 minutes ago
Betcha it'll fall before November.
Dec '10
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
ConservativeWanderer
Isn't there a term for doing the same thing over and over and expecting a different result? · 5 hours ago
Liberalism.
Oct '10
Re: Bernanke and the Fed Just Gave Romney a Huge Gift
Hang On
But it's already had a major positive effect on the stock market. · 7 hours ago
I'm not convinced that the stock market's vaunted wealth effect still exists. Most people have earned very little from stocks over the past ten years. I don't think people are going to take a look at a high stock market, and think "Wow! Free money! I'm going to borrow against it to spend!" like they might have in the mid-2000s.
Edited on September 15, 2012 at 4:35am