Mitt Romney is an inflation dove

During the campaign, Mitt Romney was about the only GOP candidate who refused to criticize Ben Bernanke. Romney kept emphasizing that the number one problem is jobs.  Then Fed-bashing Rick Perry entered the race, threatening Romney’s path to the nomination.  Now Romney was forced to switch to an anti-Fed position, to prevent all the Tea Party-types from shifting to Perry.

Here’s Bruce Bartlett in the FT:

Whoever Mr Romney names as Fed chairman, it is almost certain that he or she will take a more hawkish line on monetary policy. There are already a number of inflation hawks on the 12-member policy making Federal Open Market Committee, which includes, in addition to the seven members of the Federal Reserve Board, five of the 12 regional Federal Reserve presidents. (These presidents are named by local boards for each bank and are neither appointed by the president nor confirmed by the Senate.)

At a minimum, it is doubtful that the Fed will continue to maintain its present policy of being highly accommodative.

I am skeptical of this argument.  Suppose Romney’s elected and his Treasury Secretary Glenn Hubbard presents him with these two options:

1.  Appoint John Taylor, who is a highly respected but controversial economist.  Taylor will tighten monetary policy, and perhaps lead us into a repeat of 1937.  The slowdown will make it impossible to meet your campaign promises for jobs, deficit reduction, or almost anything else.

2.  Appoint Greg Mankiw, a highly respected Republican economist, who would breeze through the Senate almost unanimously.  He would continue the Bernanke policies, but he doesn’t have much of a paper trail, so there’s nothing for his critics to latch onto.  He would allow you to hit your policy targets.

These assumptions are not just pulled out of thin air.  Later in his FT piece Bartlett says the following:

By all accounts, Mr Taylor was disappointed not to have been named chairman of the Fed when Mr Bernanke was named instead. Taylor’s very vocal support for Mr Romney’s election would appear to put him in a good position to achieve his goal should Romney win.

Possibly standing in the way of Mr Taylor’s ambition is the economist Glenn Hubbard of Columbia University, who is Mr Romney’s principal economic adviser. He also previously served as chairman of the Council of Economic Advisors under G W Bush. (Mr Taylor was also a member of the council in the administration of Bush senior.)

It is thought that Mr Hubbard is the one who thwarted Mr Taylor’s ambition to become Fed chairman previously by having Bernanke returned to the Federal Reserve Board in 2006, even though Mr Bernanke had only completed a three-year term on the Board the previous year.

This could be important because Mr Hubbard is thought to have ambitions to be either Treasury secretary or Fed chairman. (In the interest of disclosure Mr Hubbard and I worked together at Treasury during the elder Bush’s administration.) If named Treasury secretary, Mr Hubbard would have a great deal to say about who the president names to the Fed.

I can almost guarantee that some of my commenters are so morally depraved that they will insist I am “defending Romney,” even though this entire post is devoted to calling Romney a liar.  But that’s the world we live in.

HT:  Christopher Mahoney


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41 Responses to “Mitt Romney is an inflation dove”

  1. Gravatar of Essayist-Lawyer Essayist-Lawyer
    18. October 2012 at 14:36

    Well, you have said before that politicians sometimes have to lie in the line of duty. You said that FDR should have lied about going off the gold standard so as not to create a panic during the interregnum. I suppose, then, you could condone Romney lying about being a tight money guy in order to win the nomination and protect the country from falling into the hands of a real tight money guy.

    I take it, then, that you expect Romney to keep Ryan on a pretty tight leash.

  2. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    18. October 2012 at 14:37

    I also doubt he believes the malarkey he spouted about China in the last debate.

  3. Gravatar of Suvy Suvy
    18. October 2012 at 14:53

    Just for the record, one of Romney’s advisers is Kevin Hassett. This guy was dumb enough to write Dow 36,000 in 1999.

    Another one of Romney’s advisers is, as you mentioned, Glenn Hubbard. He’s this guy: http://www.youtube.com/watch?v=CaXNqGgIc-g

    Another one of Romney’s economic advisers is Vin Weber, who lobbied extensively for Freddie Mac.

    Romney won’t provide/bring any solutions. He could very well make things much, much worse. I’m not saying Obama is the second coming, far from it. However, looking at Romney’s economic advisers; they include people that have been wrong and some of whom could very well be corrupt.

  4. Gravatar of Suvy Suvy
    18. October 2012 at 14:53

    Just for the record, one of Romney’s advisers is Kevin Hassett. This guy was dumb enough to write Dow 36,000 in 1999.

    Another one of Romney’s advisers is, as you mentioned, Glenn Hubbard. He’s this guy: http://www.youtube.com/watch?v=CaXNqGgIc-g

    Another one of Romney’s economic advisers is Vin Weber, who lobbied extensively for Freddie Mac.

    Romney won’t provide/bring any solutions. He could very well make things much, much worse. I’m not saying Obama is the second coming, far from it. However, looking at Romney’s economic advisers; they include people that have been wrong and some of whom could very well be corrupt.

  5. Gravatar of Suvy Suvy
    18. October 2012 at 14:53

    Just for the record, one of Romney’s advisers is Kevin Hassett. This guy was dumb enough to write Dow 36,000 in 1999.

    Another one of Romney’s advisers is, as you mentioned, Glenn Hubbard. He’s this guy: http://www.youtube.com/watch?v=CaXNqGgIc-g

    Another one of Romney’s economic advisers is Vin Weber, who lobbied extensively for Freddie Mac.

    Romney won’t provide/bring any solutions. He could very well make things much, much worse. I’m not saying Obama is the second coming, far from it. However, looking at Romney’s economic advisers; they include people that have been wrong and some of whom could very well be corrupt.

  6. Gravatar of Suvy Suvy
    18. October 2012 at 14:53

    Just for the record, one of Romney’s advisers is Kevin Hassett. This guy was dumb enough to write Dow 36,000 in 1999.

    Another one of Romney’s advisers is, as you mentioned, Glenn Hubbard. He’s this guy: http://www.youtube.com/watch?v=CaXNqGgIc-g

    Another one of Romney’s economic advisers is Vin Weber, who lobbied extensively for Freddie Mac.

    Romney won’t provide/bring any solutions. He could very well make things much, much worse. I’m not saying Obama is the second coming, far from it. However, looking at Romney’s economic advisers; they include people that have been wrong and some of whom could very well be corrupt.

  7. Gravatar of polymath polymath
    18. October 2012 at 15:06

    I’m completely morally depraved, but even I won’t insist you’re defending Romney.

  8. Gravatar of Doug M Doug M
    18. October 2012 at 15:23

    If it were an issue he intended to spend his political capital on, he would have made more of an issue of it before now.

    A President Romney would pick the guy who will be easilly approved.

    Regarding Taylor, how hawkish would he really be. The Taylor rule says that Fed Funds should be below zero. So, he would be accomidative of some degree of “extraordinary measures.” Perhaps, he wouldn’t be the guy to lobby “Coach Lacota” to move off the hawkish end.

    Its not like anyone is suggesting Kudlow for the job.

  9. Gravatar of ChargerCarl ChargerCarl
    18. October 2012 at 15:30

    Even a small chance of Taylor running the FED seems too risky to me.

  10. Gravatar of Morgan Warstler Morgan Warstler
    18. October 2012 at 16:34

    GOOD LORD.

    Once Romney is President, WHO CARES about inflation?

    The problems are mainly STRUCTURAL.

    The true rot is that the Hegemony, the big fish in little ponds, are not being favored over the B power, the 1%.

    That is the C Power’s fault – but we’ll deal with them later.

    ——-

    Boy and girls, Romney is not a trader.

    So he doesn’t cheer the DJIA going up because we print money.

    Romney is an brass tacks, nuts bolts, Venture Capitalist. Someone who cares deeply about the fundamentals of the actual business, that it BEATS other businesses, competes against them relentlessly drives down prices, finds productivity gains. etc.

    He’s COMFORTABLE, like all real men are, with the music stopping, the chairs being grabbed, and losers gutted… because he knows the most important to getting the music started, is the losers have to get gutted.

    There have to be LOSERS. Failure is not a big deal. Losing is not a big deal. The only truly necessary regulation is the absolute 10000% rock solid understanding that losing it all is possible.

    When people forget that, we have a bubble.

    —–

    Now then, IF ROMNEY WINS. I win.

    Scott dedicates his book to me stating clearly that macro-econ guys take a back seat to the hegemony. You work for them. You are little they are big. And EVERY future macro theory has to serve the interests of the hegemony. To get them to AGREE to let it stand.

    Because if Romney wins…

    FDR doesn’t matter anymore

    If Romney wins….

    The macro lessons of the Great Depression gets re-written where the best thing would have been, that our great parents weren’t ignorant at best, or retarded at worst… and the hegemony formed a Tea Party and FDR lost after 4 years and none of the Frenchy State stuff ever happened. And the Internet takes off 10 years earlier.

    If Romney wins…

    We do not keep acting like Scott didn’t BANK THE PRIMACY OF HIS ENTIRE THEORY on “Economic Crisis grow the state” – as the ONLY response to my narrative.

    Scott missed the Tea Party completely while I TOLD HIM – this plan has been in place SINCE before Reagan’s inauguration, in some ways it starts with Nixon.

    MacroEcon is a nice paradigm. A sub-narrative. A tool.

    But the DOMINANT story is Republic vs. Democracy.

    From 1913-1980 we saw “Democracy” be invented as this new thing – the 16th Amendment meant rich guys couldn’t hop state to state forcing govts. to always be competing…. to always be small.

    The invention of Democracy wasn’t a pure Democrat win. No sir.

    When it happened, and suddenly the rich were trapped under an Income Tax umbrella, the give back was that Federal Reserve was an “independent” entity.

    Any of you can say why it was independent, all parties admitted there was fear of this new powerful govt. using money and monetary policy for govt. power. Which you all do today with a SHRUG.

    The crass basic way to say it is – the HEGEMONY wanted to make SURE that there was another entity that ALSO WORKED FOR THEM…

    The Fed was supposed to be an insurance policy for the Hegemony in case Democracy turned out to be a punchbowl full of turds.

    Just in case the Govt. got to big for its britches. The Fed would LIQUIDATE etc.

    Now as recently as 1993 we saw a Fed Chair tell a incoming POTUS he had to dump his ENTIRE AGENDA… or else. The ECB does it all day long.

    So this in new info to any of you.

    So PLEASE understand there are all kinds of SMB owners, and many guys in larger companies who all still VERY MUCH see the Fed as a stopper on the liberal agenda.

    1. Cut taxes. Spend money on things the hegemony likes, not on non-liberal handout voters. Run massive deficits.

    2. Incoming Dem POTUS meets a Fed that works for Hegemony, he says “either the government invests or the private sector does” – which is true, the fed moves last.

    3. Bill Clinton does as told he gets 4 more years. Obama and Ben team up (not exactly but close enough) and try to over-run the hegemony…

    And if Obama loses, Ben gets shit canned for not reading Obama riot act… that was his sin.. he wasn’t Greenspan with Clinton.

    And the lessons are many… but the important one right now is that FUTURE Dem Presidents KNOW that 4 more years means their job is to cut govt. clean up deficit, and NOT pay off voters.

    Look, Obama can win. But you all know Obama didn’t WANT to be Clinton.

    Even grasping that validates the frame I have brought to this from the beginning.

    If Obama wins, SCOTT IS RIGHT. The best and only real strategy for the right is NGDPLT.

    But if Obama loses, we aren’t gong to go about chatting NGDPLT like there isn’t a more powerful force at work.

  11. Gravatar of Mario Mario
    18. October 2012 at 17:10

    In both of the last two debates, Romney talked about “raising incomes” across the board. After the first I thought it might be a coincidence, but now that it has happened two times, I’m inclined to believe that it’s a veiled reference to NGDP. Romney knows what he’s doing, and he is using the most politically acceptable framing to promote it.

  12. Gravatar of Major_Freedom Major_Freedom
    18. October 2012 at 18:38

    Romney can be a dove or a hawk, depending on which way the winds will blow him to more power.

    He has adopted the neoconservative philosophy of “prudence” and “pragmatism” which is itself derived from Machiavellian power acquiring ethics.

  13. Gravatar of Major_Freedom Major_Freedom
    18. October 2012 at 18:42

    Inflation doves and inflation hawks are equally ignorant as to what the correct inflation rate(s) ought to be.

    Only the market process can reveal the requisite information that can enable an individual to know such a thing.

    The hawks and doves are fighting each other like they have an intellectual monopoly on money matters.

  14. Gravatar of ssumner ssumner
    18. October 2012 at 19:17

    Suvy, That clip is beyond moronic. Please don’t tell me you take that sort of “creative editing” seriously. It’s propaganda. It’s at “60 Minutes” level. It’s theatre.

    ChargerCarl, I’m not worried about Romney running the Fed, I’m worried about him running the military.

  15. Gravatar of Saturos Saturos
    18. October 2012 at 19:19

    But if Mankiw chairs the Fed, who will chair the Harvard economics department?

    Yeah, Hubbard for Treasury Secretary. Harvey Rosen convinced me that Romney’s math was sound, but with the author of the Bush tax cuts leading his team I’m sure he’ll find a way to screw it up anyhow.

  16. Gravatar of Saturos Saturos
    18. October 2012 at 19:20

    Scott, you think more civillians will get killed by Romney than Obama?

  17. Gravatar of Saturos Saturos
    18. October 2012 at 19:21

    Apparently some Bangladeshi guy just tried to end the Fed for real: http://www.washingtonpost.com/business/bangladeshi-man-held-in-purported-plot-to-bomb-the-ny-federal-reserve/2012/10/18/5a18d343-09e0-4557-8d43-157fcd6ebe21_video.html

  18. Gravatar of Saturos Saturos
    18. October 2012 at 19:22

    Sorry, that probably belonged on the previous thread.

  19. Gravatar of Major_Freedom Major_Freedom
    18. October 2012 at 19:48

    Mario:

    In both of the last two debates, Romney talked about “raising incomes” across the board. After the first I thought it might be a coincidence, but now that it has happened two times, I’m inclined to believe that it’s a veiled reference to NGDP. Romney knows what he’s doing, and he is using the most politically acceptable framing to promote it.

    I doubt it. He was more likely talking about real incomes.

  20. Gravatar of Saturos Saturos
    18. October 2012 at 20:08

    Ryan Avent agrees with you: http://www.economist.com/blogs/freeexchange/2012/10/monetary-policy-4

  21. Gravatar of Policy Wank Policy Wank
    18. October 2012 at 20:13

    John Taylor is a very partisan individual and usually somehow finds a way to defend whatever the Republican line is at the moment even when that directly contradicts an earlier line that he towed. So he probably favors tight money when Democrats are in power and easy money when Republicans are in power. He would be sure not to hurt Romney’s reelection chances.

    http://www.tnr.com/blog/jonathan-chait/84429/the-gops-economist-du-jour-history#

  22. Gravatar of Saturos Saturos
    18. October 2012 at 20:18

    Are Macroeconomic Advisers right in saying that Yellen would be more dovish than Mankiw? (given that Mankiw is the only one who has actually defended NGDP targeting)

  23. Gravatar of Benjamin Cole Benjamin Cole
    18. October 2012 at 20:43

    Great blogging.

    I suspect Romney will appoint someone who will be more growth-oriented at the Fed. It may even be Taylor. Taylor was hung-ho for Japan QE, even wrote a paper gushing about it.

    Taylor wants Obama to lose, and so he hates QE now. When Romney is President, and kills Obamacare, and maybe starts up hostilities in Iran, watch for Taylor to print money enough to make Bernanke blush.

  24. Gravatar of Saturos Saturos
    19. October 2012 at 01:27

    Scandinavia is still winning: http://www.economist.com/node/21564417?fsrc=scn/tw_ec/like_father_not_like_son

  25. Gravatar of Saturos Saturos
    19. October 2012 at 03:35

    Scott, do you know what these guys are talking about? http://phys.org/news/2012-10-stock.html

  26. Gravatar of Saturos Saturos
    19. October 2012 at 03:37

    Scott, do you have any idea what these guys are talking about? http://phys.org/news/2012-10-stock.html

  27. Gravatar of Saturos Saturos
    19. October 2012 at 04:45

    Just watching the 2nd debate right now (finally) – Romney says he’ll eliminate interest, dividends, capital gains taxes for everyone making less than $200,000 (his definition of middle-class) – that’s incredible! Can Obama match that? Well I’ll just have to see as I resume the video.

  28. Gravatar of ssumner ssumner
    19. October 2012 at 05:22

    Saturos, Romney is campaigning as a hawk, I have no idea if he really is one.

    I’m skeptical of all stock market studies, and no, I don’t know what they are talking about.

  29. Gravatar of J Mann J Mann
    19. October 2012 at 05:38

    Scott, I say this as a Romney booster and a Sumner fan, but your post is objectively pro-Romney.

    That Romney is a liar is a given, because he’s a politician. Voters who care about monetary policy have to guess how Romney would govern in that regard. (That’s not entirely a question of guessing Romney’s private intentions ; some of it depends on the advisors he will have, the constraints he will face, etc.)

    You are giving comfort to people (like me) who hope that when the dust settles, Romney will support a Mankiw-style monetary policy.

    I’m all for that, and I believe you’re calling them as you see them, but presumably posts like this will help Romney with inflation doves who respect you, to the extent that (i) that’s a significant set of people and (ii) their voting intentions are subject to change at this point.

  30. Gravatar of Saturos Saturos
    19. October 2012 at 05:40

    J Mann, you’ve described about five people on this earth.

  31. Gravatar of Suvy Suvy
    19. October 2012 at 07:44

    ssumner,

    My worry isn’t so much about the clip. Romney’s actually listening to a guy that wrote this book:
    http://www.amazon.com/Dow-36-000-Strategy-Profiting/dp/0609806998/ref=sr_1_1?ie=UTF8&qid=1350661333&sr=8-1&keywords=dow+36000

    He keeps listening to people that keep being wrong. As for Glenn Hubbard, he did advocate for deregulation of financial derivatives(I have no problem with derivatives except for ones that post systemic risk like CDS). Of course, the video does take it to an extreme. Either way, it’s pretty funny.

  32. Gravatar of Suvy Suvy
    19. October 2012 at 07:46

    Basically, Romney is listening to idiots that are wrong a lot. It doesn’t inspire confidence in me.

  33. Gravatar of Suvy Suvy
    19. October 2012 at 08:03

    I’d like to add, I would be much more likely to vote for Romney if he didn’t select Paul Ryan. Paul Ryan voted for one of the largest expansions of Medicare in decades(Medicare part D) and now he says he wants to cut it, he voted for the bank bailout (when I think the appropriate solution would’ve been to nationalize the banks and shut them down or forcibly convert their debt to equity), he voted for a stupid war(Iraq) and now we should trust him to cut government spending and debt? Is this some kind of a joke? He’ll probably do the opposite.

    I had the same problem with Reagan and the same problem with a lot of the Republican party–spending went up under Reagan. When they actually get power, they don’t actually cut any spending. Now I should trust them for trying to cut all of these things. They are liars. They don’t cut anything and they’re not for small government. I don’t know how anyone can vote for a War in Iraq and say that they want small government. That’s a complete joke. I’m sorry, but anyone that does that is a complete liar that can’t be trusted.

  34. Gravatar of Adam Adam
    19. October 2012 at 08:58

    One of my main problems with Romney is that I do not know what he will do.

    I’d like to think that he’s make a pick like Mankiw, because despite what he says he’s smart and pragmatic and understands that monetary policy is important and Mankiw highly qualified.

    But what happens if the right while of his party balks? Is that a fight Romney’s willing to have? Or would he rather appease them here in the hopes of getting something else?

    It a universal problem for him. I think Romney left to his own devices would be just fine. But he won’t be left to his own devices.

  35. Gravatar of Adam Adam
    19. October 2012 at 09:00

    Scott – Doesn’t it make you pretty nervous to not know?

  36. Gravatar of Doug M Doug M
    19. October 2012 at 09:37

    Stauros,

    Scott, do you know what these guys are talking about? http://phys.org/news/2012-10-stock.html

    Tail dependence… there is nothing new here.

  37. Gravatar of JG JG
    19. October 2012 at 11:23

    I miss when you were using inflammatory titles for a while. You should go back to that and change this title to
    “Liar: Romney not as crazy as he claims he is”

  38. Gravatar of Negation of Ideology Negation of Ideology
    19. October 2012 at 20:42

    Romney’s a Wall Street pragmatist. Is it plausible that he’ll throw away his Presidency catering to a bunch of right wing gold nuts? He’ll go with Mankiw or someone similar. Paul Ryan is a different story, with all that Ayn Rand nonsense. I’ll probably vote for Romney and hope he stays healthy.

    Then Romney should ask Congress to change the Fed’s mandate to NGDP targeting and sell it as much as an inflation fighting measure as a growth promotion strategy. I doubt he’ll do it, but he should.

  39. Gravatar of Browsing Catharsis – 10.20.12 « Increasing Marginal Utility Browsing Catharsis – 10.20.12 « Increasing Marginal Utility
    20. October 2012 at 04:07

    […] Mitt Romney as an inflation dove. I would be surprised if Taylor’s views on aggregate demand management didn’t have a strong influence on the potential Romney White House. […]

  40. Gravatar of Vivian Darkbloom Vivian Darkbloom
    23. October 2012 at 05:23

    Benjamin Appelbaum of the New York Times is stealing your stuff:

    http://www.nytimes.com/2012/10/23/business/presidential-election-weighs-on-the-fed-reserve.html?hp

  41. Gravatar of Would a President Romney Change Fed Policy » Coffee and Markets Would a President Romney Change Fed Policy » Coffee and Markets
    26. October 2012 at 04:32

    […] Mitt Romney is an inflation dove How Romney Could End QE Who would Romney appoint to the Fed? Well, what does he want? […]

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