The Fed's Applied Progressivism
WASHINGTON - Because Ben Bernanke's public persona is as mild as milk, the transformation in American governance in which he has participated is imperfectly understood and hence insufficiently deplored. The change is dramatized by two recent developments.
One was the campaigning by several constituencies for and against what supposedly were the two leading candidates - Larry Summers and Janet Yellen - to replace Bernanke as chairman of the Federal Reserve. The Fed can no longer be considered separated from politics.
The second, and related, development is the semantic infiltration of journalism by language that ratifies the Fed's increasingly grandiose role. A Financial Times column on Yellen, now Bernanke's presumptive successor, described her as "poised to take the tiller of the U.S. economy." Oh? The economy has a tiller? And with it the Fed chairman can steer the economy? Who knew?
A touch on the tiller here, a nimble reversal there - these express the fatal conceit of an institution that considers itself capable of, and responsible for, fine-tuning the nation's $15.7 trillion economy.
Slowing the Fed's bond purchases is called "tapering," which means more modest "quantitative easing." This is how governments talk when trying not to be understood. By continuing the pace of "easing" - printing money - the Fed has acknowledged that its fine- tuning has failed. The nimble, tiller-touching Fed assumed it would be more successful at reducing unemployment.
Well, to err is human. To assume that a few government officials can and should steer America's vast, globally connected economy - hundreds of millions of people making trillions of decisions a day - is a kind of confidence peculiar to the progressive temperament.
Bernanke once hoped that economists might (in John Maynard Keynes' words) "get themselves thought of as humble, competent people on a level with dentists. …