Probably my favorite conservative, Bruce Bartlett wrote a very interesting article over at The Financial Times, Is the Fed Being Goaded Into Raising Rates Too Soon? As I've talked about a fair amount here, there is no economic reason for the Federal Reserve to even be discussing raising interest rates. And it seems so bizarre that I once thought I had missed something, so I asked Dean Baker, and he backed me up. There really isn't anything behind it. So the question that Bartlett has raised is why.
He isn't the first. Paul Krugman spent about a month recently obsessing over the question. And his conclusion was that the Fed is understandably closely tied to the banking community — in fact, 5 of its 12 members are appointed from the banks. And bankers make less money when interest rates are low. So the Fed is pushed by these "reasonable" and "objective" people who think that interest rates should go up. There is much to this theory, and I'm sure it is going on to one extent or another.
Bartlett offers the other side of this, which is basically that the Republican Party has gone insane. He noted three of the more thoughtful Republicans — John Taylor, Martin Feldstein, and Alan Greenspan — all argued that the Federal Reserve was going to cause inflation to go up in 2009. This, of course, goes against what conservatives of the Milton Friedman variety have always said. The liberals wanted fiscal stimulus (because, let's fact it, it is the most direct way to address recessions) and conservatives wanted monetary stimulus. But in 2009, suddenly that was all wrong. The right thing to do was what we did during the Great Depression: nothing. Or even better: cut both government spending and the the flow of cash.
Apparently, the Republican Party itself has gotten so insane that even Ben Bernanke has decided that he is no longer a Republican. And really: how could any scientist who wants to be taken seriously continue to associate with the modern Republican Party. That's especially true of economists, who show themselves to be complete hacks like Greg Mankiw who is for Keynesian stimulus as long as a Republican is in the White House. Of course, much of the blame has to be laid on the economics profession itself. Mankiw should have been shunned from the profession. But let's face it, selling out is one of the big perks of becoming a successful economist.
Bartlett never got around to discussing just why the Republicans turned into such idiots on this issue. It's certainly not, as Bernanke claims, that "the crisis had helped to radicalize large parts of the Republican Party." They weren't radicalized until a Democrat became president. Bartlett understands this, he finished his article with an allusion to what is really going on, "Had the Fed followed their advice earlier, the economy would undoubtedly be in worse shape — good for Republican electoral prospects, but bad for everyone else." And that's what is all about. The Republicans are traitors. They don't care about the country in the least. This is why we constantly have to worry about them crashing the economy: they care more about their political aspirations than they care about the good of the country. They are reactionaries who think that it may be necessary to destroy the country in order to save it.
There is no theory that underlies what they are doing. This is just power for power's sake. It's tempting to think that they will be reasonable once they get into power. But I think all the rational Republicans have been chased away. The inmates really are running the asylum. And we could end up with a Republican president who thinks that we don't have to worry about breaching the debt ceiling because he can just cut spending. This is the final act of the GOP — and maybe the country.