Aside from the election, the two most important political events of 2012 have been actions by the two officials in Washington whose offices and roles are supposed to insulate them from conventional political pressures.
First was Chief Justice John Roberts, who changed his vote against ObamaCare in June because (according to the peerless Supreme Court journalist Jan Crawford) he was concerned about the public perception of the court’s legitimacy.
Or, to put it in plain English, he was worried that liberals would say the court’s ruling proved it was stacked to the Right — and he didn’t want the Supremes to be MSNBCed to death.
Questions about the Court’s legitimacy arising from Roberts’ opinion — in which ObamaCare’s funding mechanism isn’t a tax on page 15 but is a tax on page 35 — evidently were preferable, because he figured the only people who would complain would be his fellow conservatives.
We appoint Supreme Court justices for life because we don’t want them worrying about MSNBC. They shouldn’t be engaging in repugnant sophistry to address hot political emotions of the moment, yet that’s exactly what Roberts did.
On Wednesday came the second example of a dramatic political act by a nonpolitical player — the Federal Reserve Board. In a move completely out of keeping with the central bank’s 100-year history, it laid out a specific long-term policy toward unemployment and inflation.
Chairman Ben Bernanke announced the Fed won’t lower interest rates until the unemployment rate reaches 6.5 percent. (There is a caveat: If inflation rises to 2.5 percent, that might force the Fed’s hand.) It does not expect such a thing to happen until 2015 at least. Therefore, it will continue buying tens of billions of dollars of securites every month to keep interest rates exceptionally low.
This is extraordinary. For starters, it represents an entirely new type of policy for the Federal Reserve — delineating a specific target and the measures that will be taken to reach it. And laying it out for all to see and understand.
The Federal Reserve Board has functioned since its invention in 1913 as a monumentally opaque institution — by design. It was created in the first place to prevent the bank panics that had led to consistent financial depressions throughout the 19th and early 20th centuries — and to keep politicians from making craven and convenient use of the money supply and other tools.
It has done so in part through inscrutability. Alan Greenspan, its chairman for 20 years, gave speeches and congressional testimony notable primarily for incomprehensible double-talk consciously designed to obfuscate rather than clarify.
The opacity was necessary in part to prevent gamesmanship by politicians and moneyed interests. Greenspan spoke in curlicued riddles, as did previous Fed chairmen, in part to prevent speculators and others from using his remarks as a leading indicator of market trends. Bankers and brokers have proven themselves willing to spend hundreds of millions of dollars just trying to interpret the Fed’s tea leaves.
Well, that’s over with for now. The policy is public and unambiguous, and it’s not going to change.
As one economic analyst, Chris Rupkey of Bank of Tokyo-Mitsubishi UFJ, put it: “Fed to Fed watchers: find a new job.”
Like Roberts, Bernanke has chosen this new path in part as a response to political pressure. Fed opacity has led conspiracy mongers of the Left (journalist William Greider) and the Right (Ron Paul) to view it as a terrifying secret society of puppeteers pulling the world’s strings to protect the banks with no check on its power.
Indeed, the notion of “auditing the Fed” moved from the fever swamps of the Right directly into the GOP platform this year.
Thus, while Roberts was responding to liberal political pressure, Bernanke appears to have been responding to populist conservative political pressure in making this radical break with tradition.
At least, in Bernanke’s case, he waited until after the election.