- The Washington Times - Wednesday, August 5, 2009

BEN’S TOOLBOX

Federal Reserve Chairman Ben Bernanke assured readers of this page (‘The Fed’s Exit Strategy,’ July 21) that he has the tools to prevent the huge reserves he’s pumped into the banks from generating an inflation that would abort an economic recovery,” George Melloan writes in the Wall Street Journal.

“But does the Fed have the guts to use those tools? Will it risk censure from Congress and the Obama administration if it tightens money at the crucial juncture when inflationary omens accompany a reviving economy? Mr. Bernanke signaled the probable choice by writing that ‘economic conditions are not likely to warrant tighter monetary policy for an extended period.’

“The Fed’s past record of judging when and how to use its tools for regulating the money supply is not impressive, particularly in times of economic distress. Its financing of large federal deficits in the mid-1970s sent inflation up to an annual rate approaching 15 percent before Jimmy Carter repented in October 1979 and installed Paul Volcker at the Fed with orders to kill the monster.

“More recently, the Fed’s continued easing of interest rates during the 2003 economic recovery created the credit bubble that collapsed last year with such devastation,” Mr. Melloan said.

“The Fed’s difficulties in getting money policy right stretch back to its creation in 1913. In 1930 it starved the banks, creating a string of failures that worsened the effects of the 1929 stock market crash. In 1937, it starved them again, contributing to a prolongation of the Depression that had been manufactured in Washington by the clumsy taxation and interventionist policies of Herbert Hoover and FDR.

“To be sure, the Fed has had its good years. It financed the 20-year period of low-inflation growth and prosperity that began in 1983 when the Reagan tax cuts became fully effective.

“But because of its often self-contradictory double mandate to promote both monetary stability and full employment - plus the rap it has taken from economists like Mr. Bernanke for stinginess in the 1930s - it often overreacts to recessions with excessive generosity. With its federal-funds interest rate target at near zero, the spigots are now wide open. And as Mr. Bernanke promises, they will likely remain that way for an ‘extended period.’ ”

SOUND BITES

“A leading House Democrat has been following me around for days. OK, not literally - but his words have stuck in my head, and I can’t shake them loose,” Dana Perino writes at www.foxnews.com.

“Last week, just before leaving on a monthlong recess, Rep. Chris Van Hollen, Maryland Democrat, declared, with much indignation and more than a twinge of bitterness, that they would not let the health care reform debate be ‘swift-boated.’

“That makes for a nice sound bite that appeals to the party’s left wing, but irritates most of America. And therein lies the Democrats’ problem with getting more people to back their health care effort,” said Mrs. Perino, who served as press secretary in the George W. Bush administration.

“When questioned on the merits of their proposal, they fall back on what makes them most comfortable - appealing to the far left of their party. But this comes at the expense of everyone else - they have consistently ignored the legitimate questions of the vast majority of the population, preferring to duck the tough questions and instead to make others the bad guy.

“Now that they control every office in Washington, the burden is theirs to inspire and lead on major reforms they want to pass. And yet they seem to get so offended when someone wants to know how the legislation will affect them and their families.”

LANDSCAPE SHIFTS

“Six months ago, the 2010 Senate battlefield looked relatively bare, with a few obvious skirmishes, mostly in states with GOP incumbents,” Stuart Rothenberg writes in Roll Call.

“Three months later, the outlook had brightened dramatically for Democrats, largely the result of a number of GOP retirements and solid Democratic recruiting on those open seats,” Mr. Rothenberg said.

“But now, as the dog days of summer begin, the landscape has shifted again, this time improving significantly for Republicans. Democrats no longer have the momentum they once possessed. Even more important, signs of some Democratic vulnerability have appeared, giving the National Republican Senatorial Committee opportunities to shoot at, rather than forcing it to play an entirely defensive game, as it has the past two cycles.

“Fifteen months before the midterms, Democrats have major problems in two states - Illinois and Connecticut - while a third, Nevada, remains a potential headache. Republicans, on the other hand, have serious vulnerabilities in four states - Kentucky, Missouri, New Hampshire and Ohio - and potential problems in two others. But of late, even those Republican vulnerabilities look less daunting than they once did.”

26 INVESTIGATIONS

“As Congress heads into its summer recess, some members have more worries to take home with them than others,” Beth Sussman writes at www.nationaljournal.com.

“According to Citizens for Responsibility and Ethics in Washington, 17 representatives and senators are known to currently be under investigation for breaking ethical standards. Of those under investigation, 13 are Democratic members and four are Republican members,” the writer said.

“Charges range from steering earmarked funds toward associates to tax evasion to receiving preferential mortgage rates.

“The House Committee on Standards of Official Conduct does not release information regarding which members are under investigation, but a July committee report stated that 26 investigations had been under way since the beginning of the 111th Congress, 11 of which were carried over from the 110th Congress and 15 of which began this Congress. Four investigations had been resolved in that time period. A Senate Ethics Committee official couldn’t be reached for comment.

“According to CREW’s records, the lawmakers currently under investigation are: Democrats Rep.Sanford Bishop of Georgia, Sen. Roland Burris of Illinois, Sen. Kent Conrad of North Dakota, Sen. Christopher Dodd of Connecticut, Rep. Jesse Jackson Jr. of Illinois, Sen. Robert Menendez of New Jersey, Rep. Allan Mollohan of West Virginia, Rep. John Murtha of Pennsylvania, Rep. Charles Rangel of NewYork, Rep. Laura Richardson of California, Rep. Linda Sanchez of California, Rep. Loretta Sanchez of California, Rep. Peter Visclosky of Indiana; and Republicans Rep. Don Young of Alaska, Rep. Jerry Lewis of California, Rep. Gary Miller of California and Rep. Tim Murphy of Pennsylvania.

Greg Pierce can be reached at 202/636-3285 or gpierce@washingtontimes.com.

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