Paul Ryan's Republicanomics

Paul Ryan's Republicanomics

by W.W. | IOWA CITY

YESTERDAY, Ben Bernanke, the chairman of the Federal Reserve, appeared on Capitol Hill to field questions from the House Budget Committee. The committee's new Republican chairman, Paul Ryan of Wisconsin, pressed Mr Bernanke to defend the Fed's efforts to quicken recovery through it's latest round of "quantitative easing", citing "a sharp rise in a variety of key global commodity and basic material prices" as a herald of inflation. In his opening statement, Mr Ryan acknowledged that "these cost pressures have not yet been passed along to consumers"—emphasis on "yet"—before worrying aloud that Mr Bernanke and his Fed minions threaten to wreck the economy.

"Our currency should provide a reliable store of value—it should be guided by the rule of law, not the rule of men," Mr Ryan informed Mr Bernanke. "There is nothing more insidious that a country can do to its citizens than debase its currency". And who would disagree? Yet why all this hand-wringing about inflation now? Mr Bernanke sensibly pointed out that rising prices in global commodities markets reflect rising demand in emerging markets and, in some markets, constrained supply. American monetary policy? Not so much. Furthermore, inflation is low, and inflation expectations remain steady, as Mr Bernanke duly noted. Nevertheless, the breathless rhetoric of insidious currency debasement continues to spill forth even from sober, economically-literate Republicans such as Mr Ryan.

In yesterday's edition of The Daily, Jonathan Rauch draws a useful contrast between "Reagonomics", the actual economic-policy stance of the Reagan presidency, and "Republicanomics", a vulgar, acontextual cartoon of Reagonomics. Reagan met the specific challenges of the American economy in the early 1980s through tax cuts and tight money, among other things. Republicanomics transformed the policies of the Reagan administrations and the Volcker/Greenspan Fed into hardened ideology. "Reagan's embrace of a tight monetary policy in a high-inflation environment had hardened into a dogmatic insistence on tight money and anti-inflationary policies all the time," Mr Rauch writes. And thus:

At a time when most economists saw deflation and long-term, Japanese-style stagnation as a far greater danger than inflation, and when high unemployment and below-target inflation indicated that monetary policy was too tight, Republicans were hyperventilating about "currency debasement" and denouncing the Fed's efforts to expand the money supply.

I think if we add to this the reinforcing influence of an especially simplistic strain of Austrian monetary theory, we have a fairly solid account of the source of Mr Ryan's inflated worries about inflation.

Yes, yes, conservatives: there is an analogous Donkeynomics (or whatever you'd call it) that combines cold-fusion Keynesianism, occult health-care cost-curve bending, green-energy magic beanism, etc. But today is Mr Ryan's day to shine.