Paul Krugman: Protector of FOMC Independence, Destroyer of Bernie Sanders

Federal Reserve - FOMCOn Friday, Paul Krugman wrote, On Economic Stupidity. It’s nominally about the Federal Reserve’s Open Market Committee (FOMC) and its independence. The Republicans really have shown a desire to destroy it since a Democrat has been in the White House. But while his attack on Republican economic stupidity is to the point, it is perfunctory. Yes, we know the Republicans are really bad. But let’s not forget who the real enemy is: Bernie Sanders. You see, Sanders voted for a bill that would make the Federal Reserve reveal the beneficiaries of its “special lending.” Clinton didn’t do this, which is a Very Good Thing. Krugman really should just put up a Hillary Clinton 2016 sign on his lawn and be done with it.

Dean Baker sees things a bit differently, but then, he has yet to show himself in the can for one candidate or another. He wrote, Paul Krugman, Bernie Sanders, and the Fed. And he made two points. First, he questions Krugman’s assumption (Lots of Krugman unstated assumptions these days!) that what Sanders did was wrong, “To my view, Sanders should be applauded for his actions on this front. It was a bipartisan effort that gave us more information about what went on in the crisis and the extent to which specific banks benefited from access to the Fed’s money.”

The FOMC Is Political

The second point is more interesting. The FOMC is made up of 12 members: 7 appointed by the government and 5 effectively appointed by the big banks. Right now, because of Republican blocking, there are only 5 government appointees, so it is an even split with a 10 member board. So the banks have undue influence, and the Republicans are able to give them even more influence.

Krugman is falling into a trap that he has spotted many times in others over the years. He has written a great deal about how the great “centrist” pundits claim that they have no ideology, when in fact they very much do.

Baker suggests we think about putting together a more diverse group on the FOMC, which includes labor unions, community groups, nonprofits. This might make the Fed more focused on full employment rather than its laser focus on low inflation. True, that would make the Fed a more political institution, but anyone who claims that the Fed is not a political institution is either naive or ignorant.

But Krugman is falling into a trap that he has spotted many times in others over the years. He has written a great deal about how the great “centrist” pundits claim that they have no ideology, when in fact they very much do. I want to be clear: everyone has an ideology. All Krugman is saying here is that he agrees with leaving the system the way it is. And indeed, it has worked well for him. People in the upper parts of the economy have done very well by the Fed because it really has done a great job of keeping the economy stable.

But if you are in the lower part of the economy, you have seen the down side of that stability: difficulty finding work, and low and stagnant wages when you do. But even Krugman admits that the bankers have too much clout at the FOMC. In a blog post following up on his column, he makes the case that the real problem is that people who hang out together tend to think alike, and that the problem isn’t “crude corruption.” I agree. But somehow, Krugman seems to think this works in Clinton’s favor too.

I’ll admit, Sanders has done a bad job of explaining this. I certainly don’t think that Clinton was “bought” by Goldman Sachs. Rather, she is of a type. Would she be in favor of changing the makeup of the FOMC? I don’t think so. Does that matter? Well, Paul Krugman certainly doesn’t think so. But that may just be because he is so laser focused on the true enemy in 2016: Bernie Sanders.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

16 thoughts on “Paul Krugman: Protector of FOMC Independence, Destroyer of Bernie Sanders

  1. It’s a strange thing. People are bending over backwards to convince the world Bernie is essentially no different from Hillary. The corollary to this is usually that Hillary has always been a closet liberal, and, once in office, she would use her pragmatic negotiating skills to enact meaningful pro-worker, anti-corporate reforms one incrementally important step at a time. While Bernie is all bluster, and if he would be elected (but he couldn’t be elected, because the right-wing hate machine would take him down, so if you fear right-wing politics, vote Hillary, who the right will treat respectfully) his farther-left positions will be destroyed immediately. AKA, if you really want change, Hillary’s your candidate.

    There’s a lot of strangeness here.

    The “secret liberal who campaigns as a centrist but will blow us away with progressive politics” is the same thing I recall from supporters of both Obama campaigns. I wanted Hillary over Obama in 2000; I thought she would be slightly to the left of Obama, who I suspected would be a horrible centrist. And he was. This was no Nostradamus gift of prophecy on my part. Obama campaigned as a centrist, he had center-right political advisers. He used popular leftist enthusiasm for change when it suited his campaign, and shut it down the second he got into office.

    (Near my job, there was an Obama office. A cell center, basically. One day it put up a list of foodstuffs they hoped passersby could donate; different types of meals people could bring. The next day they put up a new sign thanking the passersby and asking them to stop; they were swarmed with free food, more than they could donate to homeless shelters. Don’t ask Minnesotans to bother strangers with arguments about politics, that’s not the Midwestern way. If you ask them to bring food, though, look the fuck out. That food is coming, and it is coming in droves.)

    So Hillary is the real progressive, and Bernie the fakir? (I used that spelling of “faker” intentionally.) Huh? What? Both have made awful compromises and sensible compromises in their legislative careers; taking the risk that you fight for “A” while retreating on “B” to fight another day will make things somewhat better, that’s how politics works.

    There is a clear difference between the two, and it’s not “one will move us closer towards reform while the other will flair helplessly at the powers that be.” That’s blithering nonsense.

    What this primary campaign fish-slapping war essentially embodies is two principled candidates whose supporters have very opposing views on what America needs.

    The Hillary camp thinks we can only combat fascist insanity by making things a little better for Americans, one gradual step at a time, because losing to Republicans for so many years bent us so far to the right that it created a nation of angry disaffected voters willing to “Heil Trump.” You don’t stop that damage overnight.

    The Bernie camp thinks gradual steps have been overrun by corporate power; our side is losing ground, and if we elect more Clintons/Obamas the increasing hardships of working people won’t just produce a Trump next time; it’ll be something far worse.

    (And I’m fine with anyone who holds that a female president would be a huge step forward. I also think our first Jewish president would be a huge step forward.)

    I’m on the Bernie side in this. I don’t think we have a lot of time remaining before the working-class resentment powering Trump and Cruz becomes even uglier. As I’ve typed a zillion times before, I think the most foolish political decision in our time (by Democrats; Republicans invaded Iraq) was Obama not even negotiating for the health-care “public option,” to make it clear Republicans shot it down. Health insurance rates keep skyrocketing (the ACA has slowed this some), and almost every person blames this on “Obamacare.” That was an entirely predictable outcome; it could have been avoided; it was not. Pragmatism ruled the day. And the fallout was catastrophic.

    Supporters of pragmatism suggest we will inherit the wind if we support Sanders. Has supporting pragmatic, centrist Democrats stopped American politics from being ever-more corporate-friendly? If memory serves (and in this case my memory is taut as a tow line), we backed Bill Clinton for eight years, resulting in the most deficit-destroying tax cuts and gruesomely stupid wars in recent memory, courtesy of Republicans who took power even after we’d done our darndest to be good centrist pragmatists.

    (Al Gore cares a lot about global warming. He said so. In one of the most-publicized, highest-viewed airings of “Larry King Live” on CNN, he passionately argued for how his views should be put into public policy. On NAFTA. On NAFTA, against Ross Perot.)

    Maybe downticket (Elizabeth can explain this) the Democratic Party has a lot of good in it. Upticket (I made up that word) it is, at best, our last bastion against fascism — one that’s steadily losing. At worst, it’s a corrupt, complacent batch of bastards who long ago traded in principle for some measure of power.

    Rant over, and dirty word in the last paragraph. But it was fun to use, and I like alliteration in small doses.

    Ramping down from that rant (that was very emotional to type!) I’ll merely leave things with this old John Oliver “Daily Show” clip. (I’m quite happy “Last Week Tonight” returns this weekend. I NEED those clips to stay sane.) Also, Cat Power is on the Bern train . . .

    https://www.youtube.com/watch?v=TYbY45rHj8w

    • Hillary is the “real” progressive in this race. Also, Bernie is just too progressive to be electable.

      But leave aside the arguments about who is the more liberal/progressive. There’s something that is glossed over (when convenient) due to the fact that Sanders is running as a Democrat. The fact is, these two candidates do not subscribe to the same ideology. There’s a reason the Clintons, Gore, and the rest of the DLC crowd chose to call themselves Third Way/New Democrat. They believed they were something different than New Deal/Great Society Democrats and I take them at their word on that.

      One result is differing opinions on what constitutes ethical behaviour by public officials:

      Why We Have Generous Presidential Pensions

      Ironically, I’ve run across one or two references to Bernie as a “New” Democrat. Too young to remember the nineties, maybe?

      • I’ve typed elsewhere here, I don’t blame the New Democrats for the choices they made. They honestly believed it was either compromise with Wall Street or keep losing forever. If I were in their shoes, I might have made the same choice.

        But just like we have data on whether tax cuts for the rich pay for themselves, we have copious data on whether Democratic presidents choosing the “Third Way” made incremental progress or American politics kept careening full-steam-ahead to the right. The results are in; it’s been a disaster.

        Note that neither the wild-eyed, foaming-at-the-mouth socialist nor the sensible, pragmatic centrist even dream of mentioning climate change. It’s only the biggest issue the human race has ever faced. And it’s off the table. You can’t talk about it as an issue or you’re dead. This after eight years of a Democratic president who promised, more than once, he would make it a focal point of his administration.

        I spent more energy on politics working for the “public option” to at least be offered in Obama’s health care package than I ever have on anything since. And I swore, at the time, if Obama let us down on that one, I’d never vote for a Democratic president ever again. And I won’t. I’ll vote Green if my vote is the last thing stopping Adolf Cruz. If the best this country can do for workers is the Third Way, then let this shit burn. I’m a patriot at heart, I love American unions and national parks, but I’ll be fucked if a give a piss about the pathetic antibiotics Democratic presidents keep applying to Wall Street’s cancer while calling it “change.”

        I’m with Jeremiah Wright. If that’s the best America we can get, then God damn America.

    • Elizabeth doesn’t want to respond because she feels like she just got verbally slapped for supporting Clinton and for running for office as a Democrat.

      And that is why so much of the hated establishment are not fans of Sanders or his platform. We have been trying for years to get things changed and here comes Sanders to tell us our efforts were not just not enough but they also harmed people that we also supposedly don’t care about. It is insulting to the people who have spent decades doing their best to push progress forward in the restrictions our system places on office holders.

      I know that is not what you meant but that is the impression from the first read.

      • I get what you’re saying. Again; downticket. Downticket, Keith Elllison is a local hero of mine. Warren, Franken, these people are great.

        Upticket — as someone who’s always been poor and powerless — I think I have a right to call out Carter, Clinton, and Obama for abandoning labor. Because they did. The reasons might have been sound, we can argue that. But they abandoned labor. They abandoned my people. Carter swore he would back labor legislation. He turned on it. Clinton/Gore pimped NAFTA. Obama swore he’d stand with workers. He promised this. He said he’d be there. When workers were demonstrating in Wisconsin, Obama left them out to dry.

        So, no, I would never diminish the hard work downticket Democrats have done and keep doing. Upticket? Democratic presidents have taken a turd on labor for 40 years, and expect labor to keep crawling back to them because the only other option is worse.

        I’m sorry if you feel offended. But my back always hurts, I don’t have much longer I can survive working for poor pay, that’s what life is like for the working class. The great unwashed. The losers. Who once upon a time had the Democratic party on our side. Democratic presidents haven’t been on our side for a long time. I’m thankful judges and representatives still are, but it’s not nearly enough.

        • And, if I may overdefend myself enough (it seems to be when I overdefend myself that I get stupid) — I loved, and continue to love, Democratic governor Mark Dayton. Who is quitting politics at the end of his second term, and Minneosta will be worse without him.

          Has he compromised? Oh, yes. Sure. Nothing gets done without compromise. But where did he start from?

          The other candidates for governor were ones the local DFL (Democrat-Farmer-Labor, it’s what the party calls itself here) preferred. These are the people who absolutely savaged Al Franken in his primary run. They were utterly unprincipled and brutal; they were full-bore Karl Rove. They weren’t as vicious towards Dayton. But they sure as hell didn’t want him elected.

          Why did I submit an absentee ballot for Dayton when I knew I would be on vacation?

          Because of this Dayton line: “There’s a class war going on in this country. And our side didn’t start it.”

          That’s a politician I’ll submit an absentee-ballot primary vote for. And, you know what? He’s compromised, he’s done what he had to do, and he’s been an astonishingly good governor.

          Last summer everybody in Minnesota was screaming and moaning about how all the roads were under construction. It was a true traffic nightmare. Why were the roads under construction? Because the roads and bridges badly needed to be fixed, and Governor Dayton pushed through every repair bill imaginable, since eventually Republicans will win elections again and nobody will fund government. It was a terrible summer for driving, and, now, those roads/bridges will be in good shape for 50 years.

          Would the chosen candidates of the local DFL have pushed through those road repairs? Maybe, I dunno. Would they have raised taxes on the rich a little bit and created solid local economic growth? Maybe, I dunno. I know the candidate who campaigned on being to the left of the Democratic party establishment did accomplish these things.

    • As I’ve pointed out before, we should believe what candidates say, because they are pretty good at doing what they say. But you have to be careful. I’m very concerned about what Clinton has said about the TPP because it indicates to me that she will sign it, even though tshe is implying that she won’t.

      I hadn’t thought of Krugman’s article in that way, but that is a fair reading. That’s the thing with his Sanders attacks — they don’t make much sense. I think that’s because Krugman doesn’t actually disagree with Sanders on the issues. This is all about electability. And as I said: let’s talk about that.

      On the other hand, if Sanders gets elected, he will probably fail. If he doesn’t fail, Fox News will spend the next 8 years telling conservatives that he did. And we will be back in the same place with angry conservatives saying, “Give me liberty or give me death.” Did you get your Cat Power CD?

      • Oof, my apology for my original post is even more terrible than the original post. The original makes some lunatic sense; the apology, I can’t even understand it. (And I wrote the original half-drunk and the apology sober.)

        Can’t a fellow delete these things? My default on the Twins site, where I can delete these things, is I delete them if nodody’s responded to them. Once someone else has chimed in, the thread is set in papyrus.

        Electability is the only issue. Amazingly Krugman and Krum et al are avoiding that issue. I can’t help but sense a little bit of class obliviousness there. Why does Sanders appeal to anyone? Why does Trump appeal to anyone? If you have a good income at a fun job being a writer, this must seem like decoding the Rosetta Stone.

        I did get the Cat Power CD. I’ll try and listen to it today. I never listen to music anymore, but I’ll give it a try.

        • I really have no idea what you are apologizing for. I agreed with what you wrote. You’re just too self-critical.

          Let me know what you think of the CD.

          • It is a little (a little?) mad. There’s a fine line between being too blissfully self-loving (Reagan), too paranoid about how others see you (Nixon), too desperate for attention so you must brag constantly (no Republican presidential candidate comes immediately to mind) and too self-critical.

            We watched “Secret Honor” last night, and I apologized to the SO that it sounded a little like me on one of my self-loathing rants. “A little bit,” was the response.

            Then we saw “Spotlight” today, and I almost couldn’t handle it. The reporters had the story years before they followed up on it. They fucked up. And yet they eventually got it right. Where’s the line there between being too self-critical and not self-critical enough? Hard to say. We live and learn, I guess.

            (Damnation, when Tom McCarthy is on fire — like “The Visitor” and “The Station Agent” and “Up” and “Spotlight” — he absolutely breaks my heart. What a terrific writer.)

            • I’ll have to check out “Spotlight.” Self-criticism is fine as long as it doesn’t stop you from doing things. But when you complain about your own comments, I actually have no idea what you are talking about.

              • Sometimes they’re insane comments. It’s the Internet. Stupidity happens. I’m a master at it.

                I am working on including title attributes in HTML, though. They can kinda be silly little MST3K-style comments on one’s own post as well as descriptions of the link. I was in a dark place after watching “Spotlight” and I badly needed some silliness to focus on. Even if the post is serious, the title attributes don’t have to be. I love those.

                “Spotlight” killed me. It wasn’t the movie I thought I was going to see. I thought it was going to be “All The President’s Men” about exposing abuse in the church, and I could get my happy “good people break the story,” “Michael Clayton”fix.

                It’s not that movie. At one point, a reporter tracks down a suspected abusive priest and he answers the question, “did you rape kids” with “sure, who wasn’t raped as a kid?” Oh my fucking God.

                The last scene of the movie is, the paper finally reports the story, and all the reporters are expecting angry phone calls from Catholics. That’s why they put off publishing the story for so long; it’s Boston, gotta be careful. The phones ring off the hook. It’s not angry Catholic readers on the phone. It’s abuse victims.

                In a different movie, that would be a triumphant scene. The truth wins. In “Spotlight,” it’s heartbreaking. It’s one of the darkest, most devastating moments I’ve seen in a film. It’s very Al Swearengen. There aren’t any heroes. Just people who wipe the blood off the floor.

  2. I’d erase that upper comment if I could. I hate it. What is important is that, in an economy which values moronic investors over workers, some workers become more moronic. They agree that effort put into necessary tasks is just something no fabulous winner does, and you’re a winner too if other workers will fix all the shit you left undone. Those workers are suckers; you’re playing them for the fools they are.

    In reality those workers are keeping the boat afloat, and without them the ones who assume hard workers are suckers would be unemployable. These are the people who adulate Trump. He’s a hero; he’s a lazy incompetent nitwit who fucks up incessantly and someone else always mitigates the damage of his rank ineptitude.

    I hate other GOP candidates more for their obeisance to noxious party maxims; I hate Trump in a personal way, as a fuckbasket who steals other people’s labor.

  3. I wish I had more to say on the subject of this article. For a long time, I’ve thought the Fed ought to at least be more democratically accountable or even be abolished as a private entity, in large part because it has ignored its mandate to promote full employment. However like most people, I find the workings of the banking system opaque and obscure, so cannot justify actually taking any real position. One of these days I’ll get around to reading William Greider’s Secrets of the Temple: How the Federal Reserve Runs the Country. Greider is usually a trustworthy source, I think.

    • But you are correct about them not taking their full employment mandate seriously. Dean Baker tells a story about talking to a couple of people at the Fed who admit that no one really takes it seriously. It is all about low inflation. If employment stays high, great; but if it doesn’t, they don’t especially care.

      But I agree: it is very mysterious. Reading Tim Duy has helped me some, though.

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