George Will's Elitist Views
George Will tries to talk about Fed policy, but if you don't understand the Fed's goals - and he doesn't - then the analysis of policy will be based on a faulty premise and reach incorrect conclusions. George Will thinks:
The Fed's mission is to preserve the currency as a store of value by preventing inflation. ... The Fed should not try to produce this or that rate of economic growth or unemployment
But that's wrong. As Mishkin says:
In a democratic society like our own, the ultimate purpose of the central bank is to promote the public good by pursuing a course of monetary policy that fosters economic prosperity and social welfare. In the United States, as in virtually every other country, the central bank has a more specific set of objectives that have been established by the government. This mandate was originally specified by the Federal Reserve Act of 1913 and was most recently clarified by an amendment to the Federal Reserve Act in 1977.
According to this legislation, the Federal Reserve's mandate is "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." Because long-term interest rates can remain low only in a stable macroeconomic environment, these goals are often referred to as the dual mandate; that is, the Federal Reserve seeks to promote the two coequal objectives of maximum employment and price stability.
How concerned is George Will about the working class and employment? Should we use monetary policy to try to stimulate employment even if there's a chance of inflation? Not in George Will's world:
A surge of inflation might mean the end of the world as we have known it.
He ends his column by putting his analytical skills to work:
If Congress cannot suppress its itch to "do something" while markets are correcting the prices of housing and money, Congress could pass a law saying: No company benefiting from a substantial federal subvention ... may pay any executive more than the highest pay of a federal civil servant ($124,010). That would dampen Wall Street's enthusiasm for measures that socialize losses while keeping profits private.
First he tells us - incorrectly - that the Fed's sole job is to "to preserve the currency as a store of value." But now he tells us that government should not intervene when markets are "correcting the prices of housing and money." So which is it, do we let markets correct the price of money or not?
He doesn't think the Fed should do anything to help the working class stay employed, but that didn't stop him from trying to make the case in his last column that Democrats, Barrack Obama in particular, follow a "doctrine of condescension toward those people":
What had been under FDR a celebration of America and the values of its working people has become a doctrine of condescension toward those people...
That is, of course, a crock, but what is the condescension here? I think making up Fed goals to support a policy that ignores working class' needs is the condescending act. It's telling in any case.
Why is George Will so elitist? Maybe it's his background:
Barack Obama's comments about the white working class have thrown the political campaign into a particularly comic spasm of pretense and hypocrisy, but I was planning to let it go, I really was, until George F. Will decided to leap to the defense of the proletariat. Yes, that George F. Will. The fabulously wealthy, bow tie-wearing, pretentious reference-mongering, Anglophilic fop who grew up in a university town as a professor's son, earned two advanced degrees, has a designated table at a French restaurant in Georgetown, and, had he dwelt for any extended time among the working class, would be lucky to escape without his underwear being yanked up over his ears.
George, stick to writing about baseball. I don't know if your analytical skills are any better, probably not, and let's hope it doesn't somehow fool people into thinking you are "regular folks," you're not, but making the heroic assumption that the things you write matter at all, at least the damage you can do from misinforming people will be limited to baseball rather than having the potential to cost people their jobs.
Posted by Mark Thoma on Sunday, April 20, 2008 at 11:21 AM in Economics, Inflation, Monetary Policy, Unemployment |
You can follow this conversation by subscribing to the comment feed for this post.