Will America start prospering again — as it has not prospered for over a decade? Likely yes. But not without a fight. Now that Jim DeMint has raided Steve Moore from the Wall Street Journal that card might be Heritage Foundation vs. the White House. Could be big.
John Holdren, now Obama’s White House science advisor, 40 years ago termed America “overdeveloped.” Holdren co-authored a 1993 book, Human Ecology: Problems and Solutions, with Anne and Paul Ehrlich reportedly saying that, “A massive campaign must be launched to restore a high-quality environment in North America and to de-develop the United States….” (Emphasis supplied.)
As Reason Magazine’s Ronald Bailey put it upon the occasion of Holdren’s nomination to White House service: “Holdren … acknowledge(s) ecological ignorance about the principles of economics, but [didn't] express any urgency in learning about them.” Holdren seems, to this columnist, still to favor “de-development” more euphemistically stated as “sustainable prosperity.”
The Federal Reserve System recently turned 100, but it has presided over a century of folly, argues Professor Richard Timberlake in his magisterial 2013 book Constitutional Money (Cambridge University Press). Timberlake, professor emeritus at the University of Georgia, makes a compelling case that the U.S. made a terrible blunder in abandoning the gold standard in favor of a fiat monetary system under the control of a few supposed experts.
While the proponents of the Fed were certain that America needed a modern, “scientific” system to control money and credit, what we have learned is that the rule of experts, no matter how brilliant their credentials, is far inferior to the stability of a self-regulating market. We have replaced the rule of law – both constitutional and economic – with the rule of men; that is just as damaging with regard to money as with any other aspect of life.
Dr. Janet Yellen now has taken over the chair of the Fed. And President Obama, to great acclaim, recently nominated Prof. Stanley Fischer as Vice Chairman. Prof. Fischer may be the most distinguished and beloved central banker at work within the world financial system today.
It is not often that central bankers find themselves beloved. Fed Chairman William McChesney Martin famously quoted a writer saying that the Federal Reserve is “in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.” Yet Fischer is beloved.
In 1999 Dr. Fischer was interviewed by Arthur J. Rolnick, then Senior Vice President and Director of Research of the Federal Reserve Bank of Minnesota. The Fed, at that moment, was riding high. When asked about the gold standard, Dr. Fischer’s answer concluded that “It may be hubris to believe that human beings can do better than depend on the supply of gold, but we certainly should be able to do so, and are doing so now.”
With the Federal Reserve’s recent announcement that it’s set to begin reducing its monthly purchases of interest-bearing bonds, the conversation has partially shifted to the economic implications of the central bank’s pivot. If the ‘taper’ is engineered properly, the near and long-term results have the potential to be very positive.
To see why, it’s useful to look back to Robert L. Bartley’s essential 1992 book, The Seven Fat Years. Bartley was of course the long-time editor of the Wall Street Journal’s editorial page, and monetary policy was a major focus of his writing.
In a 1986 editorial referenced within, Bartley observed about monetary policy that “a central bank can follow a quantity rule,” or it can utilize “a price rule, which we have come to favor in light of recent experience.” The Fed can focus on the quantity of dollars created without regard to the dollar’s value, or it can focus on stabilizing the value of the dollar without regard to the quantity of dollars issued.
Following President Obama’s lead, the Democrats are seeking to make income inequality the wedge issue of the 2014 Congressional and Senate elections. This unquestionably addresses an issue that — after forty years of middle class family wage stagnation — resonates with voters. Yet the Republicans, thanks to Sen. John Cornyn (R-Tx) and Rep. Kevin Brady (R-Tx), not the Democrats, are better positioned to take this on.
The Republicans are far better positioned to get right and use the underlying issue — which is more one of inequity than inequality — to political advantage. The rise of stagnation and inequality started (and continued and continues) with shabby monetary policy. The GOP (which, by the way, has issued an authentic invitation for Democrats to engage with them) has taken the lead on getting to the root of stagnation and inequality. There is a Republican-authored, with one Democratic co-sponsor, pending proposal to form a Monetary Commission to get, among other things, to the bottom of this very issue.