GOP ‘sabotage’ of economy rejected by Fed

Posted by AzBlueMeanie:

The Tea-Publican leadership in Congress, once again, sent a letter to Federal Reserve Board Chairman Ben Bernanke telling him not to do anything that might help the economic recovery. Today, Bernanke rejected the Tea-Publican demands by putting his "country first."

Steve Benen explains the sordid details in a series of posts. Political Animal – GOP leaders to Fed: Let America suffer:

[W]hile we wait for word from the Fed, congressional Republicans aren’t just sitting around — they’re actively lobbying Bernanke, pressing him to let the economy stay on its downward trajectory and to not even try to help.

Even though the financial markets have been counting on the Federal Reserve to take action, Republican Congressional leadership sent a letter to the Federal Reserve chairman on Tuesday evening urging it not to engage in further stimulus.

The letter was sent in the midst of a two-day meeting in which Fed officials are widely expected to undertake policies to lower long-term interest rates. That move would be intended to loosen up credit in hopes of promoting growth. The meeting ends Wednesday, and the Fed is expected to release a statement Wednesday at 2:15 p.m.

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If this seems at all familiar, it’s because Republican leaders also wrote a letter to Bernanke last November, expressing “concerns” about the Fed’s efforts to boost economic growth.

There’s no shortage of problems with this. For one thing, the Federal Reserve is supposed to be an independent agency. This kind of partisan lobbying from congressional leaders is unseemly.

But given the larger circumstances, Republicans’ disregard for political norms is the least of the nation’s troubles. More pressing is the fact that the leaders of a major political party appear eager, if not desperate, to prevent steps that may improve the economy. The top four GOP members of Congress, including the Speaker of the House, practically demanded yesterday that no steps be taken at all as our anemic growth stalls and the job crisis intensifies.

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As things stand, Republican leaders, some of whom have admitted that defeating President Obama is their single highest priority, now want the Fed to sit on its hands, want to strip the American Jobs Act of its most effective measures, and want to raise middle-class taxes. Oh, and they’re threatening to shut down the government, too. These are just the positions they’ve talked up over the last week.

Continuing at Political Animal – When economic motives come into question:

[T]he GOP leaders have decided to actively lobby Bernanke, pressing him to let the economy stay on its downward trajectory and to not even try to help.

David Frum, a center-right observer, had a noteworthy response to the Republican correspondence.

I’m not shocked by much anymore, 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. […]

[T]he 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…. This is the hour for united action against the economic crisis, not partisan maneuvering. 

Frum doesn’t come right out and say it explicitly, but reading this, it appears Frum believes Republican leaders are — or at least may be — trying to hurt the economy on purpose, as part of a political strategy to undermine President Obama during a crisis.

In other words, Frum seems to be suggesting that the top GOP officials in Congress, including the entire party leadership, may be involved in some kind of sabotage campaign. That’s no small charge.

But it is an increasingly common one. Michael Cohen, a senior fellow at American Security Project, apparently following up on a discussion I launched last November, said this afternoon, “We’re far past the point where there is reason to doubt that the GOP is purposely trying to harm” the economy.

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 Andrew Sullivan is thinking along the same lines, too: “Every time you think the ultras in the current GOP won’t go there, they do. They’ll sabotage economic growth for short term political advantage.”

Finally, Political Animal – Bernanke makes his move:

Congressional Republicans wanted Fed Chairman Ben Bernanke to sit on his hands and let the economy deteriorate.

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It looks like Bernanke doesn’t much care what conservative Republicans think. I’m not sure if today’s actions meet the standard for “treason” under Perry, but the Fed chairman has nevertheless unveiled a new round of efforts.

The Federal Reserve announced a new plan Wednesday to stimulate growth by purchasing $400 billion in long-term Treasury securities with proceeds from the sale of short-term government debt, defying Republican demands to refrain from new actions.

In extending its campaign of novel efforts to shake the economy from its torpor, the Fed said that it was responding to evidence that there was a clear need for help.

“Growth remains slow. Recent indicators point to continuing weakness in overall labor market conditions and the unemployment rate remains elevated,” the Fed said in a statement that listed its reasons for worry about the anemic condition of the American economy. “Household spending has been increasing at only a modest pace in recent months.”

The central bank said in a statement that the program was aimed at reducing the cost of borrowing for businesses and consumers, including the cost of mortgage loans. It hopes that the lower rates will encourage companies to build new factories and hire more workers, and consumers to start spending again on homes and cars and clothes and vacations. 

All told, over the next nine months, the Fed intends to sell $400 billion in Treasury securities, shifting from shorter-term to longer-term holdings, with the intention of lowering yields and reducing rates on mortgages and other loans. It’s been labeled “Operation Twist,” and comes nearly a year after the “QE2” policy.