Reuters
Tug-of-war begins on Bernanke's political voice
By Tim Ahmann
WASHINGTON (Reuters) - A quiet tug-of-war has begun over the role presumptive future Federal Reserve chief Ben Bernanke will play in Washington budget debates, with both conservatives and liberals hoping he'll be one of their own.
Conservatives express confidence that Bernanke, if confirmed by the Senate to succeed Alan Greenspan next year, will do nothing to upset the Bush administration's apple cart when its comes to its tax-cutting agenda.
Liberals, in contrast, hope Bernanke, who associates say lacks clear ideological stripes, will be a voice of fiscal restraint and a counterweight to Bush's tax-cutting zeal.
Long-time colleagues and past comments from the nominee suggest the politically moderate monetary expert may hew to a middle ground, stopping short of comments that could be seen as advocating particular policies but speaking freely in broad terms when he thinks budgetary discipline is needed.
In essence, supporters say, Bernanke is likely to be more restrained in offering budgetary advice than his predecessor.
Greenspan has often been criticized for stepping outside the Fed's bailiwick in weighing in on contentious fiscal debates -- from advocating tax cuts to arguing the merits of private accounts under the Social Security retirement program.
When Bernanke took his current job as chairman of President George W. Bush's Council of Economic Advisers in June, there was speculation the White House wanted to draw him close for scrutiny as a potential Fed candidate out of concern he might prove ideologically out of step.
BUSH LINE
Since landing at the White House, Bernanke has trumpeted the Bush line in a way some analysts think could constrain his ability to take another tack.
Echoing other administration types, he has argued that failure to make the president's first-term tax cuts permanent could sow financial market unease and weigh on economic growth. And he has counseled Congress to take an ax to spending rather than raise taxes to narrow the U.S. budget gap.
"That was sort of his dress rehearsal, so to speak," Wall Street Journal editorial writer and tax-cut advocate Stephen Moore said of Bernanke's tenure at the CEA. "He passed with flying colors. He was very loyal to Bush's agenda."
The one-time Fed governor, however, has kept his own counsel since the president tapped him on Monday to replace Greenspan, who steps down on January 31 after more than 18 years atop the world's most powerful central bank.
The former Fed Governor and Princeton University professor has spoken with a number of members of the U.S. Senate Banking Committee, the panel charged with considering his nomination, as he begins to lay the groundwork for his hoped-for confirmation.
FISCAL ADVISER?
Democratic Sen. Charles Schumer of New York said Bernanke told him by phone on Monday he wanted to steer clear of weighing in on fiscal policy debates.
"I told him he should rethink that," Schumer said, according to the Washington Post. A spokesman for Schumer said Bernanke replied that he would take the suggestion under advisement.
But associates say Bernanke's position may have been misconstrued.
"It's not that he's not going to talk about fiscal issues, but that he's only going to talk about fiscal issues insofar as they affect monetary policy and insofar as they affect price stability and financial stability," said Adam Posen of the Institute for International Economics.
In a June 2004 interview published by the Minneapolis Federal Reserve Bank, Bernanke said he believed the Fed should offer advice when the government lost budgetary discipline.
"The central bank has the responsibility to be a nonpartisan adviser on general matters of macroeconomic and financial stability," he said. "So to the extent that deficits and debt are threatening macroeconomic and financial stability, the central bank is one actor that can provide advice and counsel to fiscal policy-makers."
Arthur Laffer, one of a number of supply-side, tax-cutting advocates to whom Bernanke has reached out in recent months, said he would not worry if Bernanke did decide to speak out.
"If he were hostile to tax cuts, obviously that would be a problem for me, but that's not where he's at," Laffer, a professed Bernanke fan, said.
On the opposite side of the spectrum, former Princeton colleague Paul Krugman was also rejoicing. "There's not a hint in his work of support for the right-wing supply-side doctrine," Krugman wrote in Friday's New York Times.
(Additional reporting by Caren Bohan)