The Whole Economy In His Hands

Wielding economic influence that touches the lives of most of the world’s nearly six-and-a-half billion people, the chairman of the Federal Reserve Board of Governors (Fed) is frequently said to be second only to the President of the United States in power. It is no understatement to say that President Bush’s appointment of Alan Greenspan’s successor was one of the most consequential decisions of his presidency. Given the array of possibilities, we are surprisingly satisfied with Bush’s latest appointment of Ben S. Bernanke ’75.

Bernanke’s résume is impressive. After graduating summa cum laude from the College, he received his Ph.D. at MIT and taught at Stanford and Princeton. Widely known as an expert on monetary policy, Bernanke served as a Fed governor for two years, and for the past 10 months has been chairman of the Council of Economic Advisers (CEA). He is well liked and respected by other economists and his colleagues, regardless of their political persuasion. Furthermore, financial markets responded positively after the president’s announcement, and praise emanated from the department of economics’ Littauer Center offices even though Baker Professor of Economics Martin S. Feldstein ’61 was passed over for the job.

That is not to say that Bernanke is perfect. In the past, particularly as CEA chair, Bernanke has supported fiscal policies that we strongly oppose, specifically further Bush tax cuts. However, he has been the least political of Bush’s CEA chairs—though that may not be saying much—and those who know him well say that his disposition is to remain above the partisan fray.

It is crucial he does just that. When Bernanke moves just up Constitution Ave. to the Fed, he assumes a unique position deliberately designed to be insulated from the political tides of Washington. The Fed chairman should remain unpartisan, focusing on the long-run growth of the economy rather than short political time horizons. That’s not to say he should not advise the president or speak out when he believes a policy is wrong. But he should not simply tow a party line.

Greenspan’s experience shows the possible dangers of the job. Few will debate that Greenspan has been a legendary chairman, but his reputation was tarnished when, in a partisan manner, he dabbled in fiscal policy in 2001, effectively endorsing the Bush tax cuts in his congressional testimony. In doing so, Greenspan was not the steward to the prosperity of the economy that he should have been. Bernanke must learn from and not repeat Greenspan’s actions if he is to be a successful chair. He must always be mindful of his tremendous responsibility: fostering the overall health of the economy, not supporting any political agenda.