"It profits me but little that a vigilant authority always protects the tranquillity of my pleasures and constantly averts all dangers from my path, without my care or concern, if this same authority is the absolute master of my liberty and my life."

--Alexis de Tocqueville, Democracy in America

Thursday, November 18, 2010

Posner on QE2

The Federal Reserve's decision to try to stimulate the economy by essentially printing $600 billion worth of currency has drawn a lot of criticism, most of which focuses on the impact on (a) inflation (it will go up, naturally); or (b) the dollar (it will go down, helping exports, but likely sparking our overseas competitors to retaliate).   This commentary by Judge Richard Posner of the Seventh Circuit (and of the University of Chicago Law School) on the blog he writes with Nobel Prize-winning economist Gary Becker, hits a key point that is separate from the economics of the issue:
The third and perhaps biggest objection to the program of quantitative easing is that it relaxes the pressure on our politicians to address urgent issues of economic reform. The politicians are sitting back and letting the Fed try to hoist us out of our current economic hole. The pressure to respond to the urgent need to put the health reform and financial regulatory reform programs on hold because of the debilitating uncertainty that they have injected into the business environment, and to take effective steps that will be politically painful (for they will include entitlements reform) toward increasing the rate of economic growth and reducing the rate of increase of the national debt, is being blunted. 
For too many years, the governing class has set up "blue ribbon commissions" (like the Alan Simpson-Erskine Bowles debt commission upon which I have commented here) or else looked to unelected bodies like the Federal Reserve to solve the looming economic issues that are more properly the responsibility of our President and Congress.   When the Fed can juice the economy to create a simulacrum of growth in the near-term, the politicians can go on rent-seeking for their constituencies (read: "earmarks"), and ignore the long-term problems of a dwindling stock of human capital (read: "bad educational system"), distorted business incentives (read: "too many lawyers") and runaway entitlements (read: "payoffs to the AARP voting bloc").  

The new Congress better watch out.  I think people are sick and tired of Congress kicking these cans down the road.   I think people have seen too much of this sort of thing in their own workplaces -- the accounting gimmicks that substitute for real productivity gains (analogous to the Fed), the monthly meetings of the sub-committee on workplace diversity and ergonomic work stations that spend hundreds of man-hours coming up with new and interesting reports on how we can stop wasting hundreds of man-hours (analogous to the Debt Commission).   I think they've had enough and want common sense, not hocus-pocus, and not more lawyers in more suits issuing more reports.   

No comments:

Post a Comment