Saturday, January 23, 2010

The looming Bernanke fiasco

I can't say that I have a strongly favorable opinion of Ben Bernanke but in my view he inherited a calamity from Alan Greenspan and performed reasonably well throughout the height of the crisis. That said unemployment is still at 10%, foreclosures continue to run rampant and he doesn't seem to be much concerned with these issues. So what's a Senator to do?

Well, there seems to be some sentiment from Senate Democrats that Bernanke should be voted down as a show of opposition to Obama's entire economic team. That sort of message sending seems pretty silly and shallow to me. First, stories have been circulating for a week or more of Obama's unhappiness with Treasury Secretary Tim Geithner (who never should have gotten the job in the first place in my opinion). The problem that Obama faces is that the dysfunction in the Senate is preventing many top positions (including twenty or so in Treasury itself) from being filled. If he fires Geithner, how will he get a new Secretary confirmed? There's no point in the Senate sending Obama a message, it appears that The White House understands the issue. It's the Senate itself that is preventing Obama from jettisoning Geithner and Senate Democrats need to figure out how they are going to get Obama out of this box.

The second issue is closely related to the first issue, namely who do these Senators think they can get confirmed as Fed Chairman if they vote down Bernanke? Do they really think that Larry Summers will fare any better? Or a more progressive nominee like Paul Krugman? Even if the administration avoids a sure lightning rod nominee like Summers or Krugman is there any reason to believe that the newly invigorated GOP won't make hay of any Obama nominee?

The paralysis in the Senate has reached a tipping point. GOP obstructionists, more emboldened now that ever, are making it nearly impossible for our government to function. Ideologically Bernanke certainly doesn't offend the sensibilities of most Republicans. Again though, what do they have to lose in opposing Bernanke? It would be another defeat for the administration and Harry Reid and if the GOP has taken any lesson from Tuesday's special election it's that the public is going to punish Democrats for the effects of Republican obstructionism.


J said...

Why vote him down anyways? He's done an exceptionally good job under the circumstances. Who's going to do a better job? And with what resources are they going to do better?

T.R. Donoghue said...

Well yes, if you believe that he has done an exceptionally good job then there's no reason to appoint anyone else. I don't think that's all that clear that he's done an exceptionally good job though. There are some fair criticisms of his performance (as I mentioned earlier in the piece) and depending on how much weight you give to those criticisms it may make sense to nominate someone else.

As to who would do better that's the tough question. It's not even who would do better - but how you define better and then can you get that person confirmed.

Andrew Oh-Willeke said...

The argument for voting "no" doesn't necessarily undermine Obama much. It is basically that Bernanke's approach to the financial crisis has been discredited and that Obama's current plan to get us out of the recession is an approach that he didn't favor.

Also, in terms of sending a message, Obama is not the one who needs to know. It is the 2010 election voting public that needs to know that Congress recognizes that something is amiss with the current team, so that they can have enough confidence in them to vote them back in.

I also do not believe that the barrier to confirming executive branch appointees, particularly cabinet rank officials, is as great as suggested. Cabinet level officials are almost never voted down (and those who want the filibuster to stay also believe in that U.S. Senate tradition), and subcabinet non-appointment delays are the norm on a long standing basis.

The argument that the sky will fall if Bernanke is not confirmed just doesn't seem plausible. And, a show of force in an area where it is likely to do no harm, like here, builds confidence in the caucus that it can be bold in other areas.