Perry Sticks by His Bernanke Attack

Texas Governor Rick Perry introduced himself to the U.S. electorate Monday night by offering the country a little monetary advice.

Asked about the Federal Reserve at a campaign event in Cedar Rapids, Iowa, Perry said of Fed Chairman Ben S. Bernanke: “If this guy prints more money between now and the election, I don’t know what you all would do to him in Iowa, but we would treat him pretty ugly down in Texas.”

And what would move amiable Texans to such ugliness? “Printing more money to play politics at this particular time in American history is almost treacherous -- or treasonous -- in my opinion.”

Let’s give him the benefit of the doubt, and ascribe the violent rhetoric to the passions of a new campaign. Does the underlying sentiment reveal anything important about the governor’s grasp of monetary policy? Or his political strategy? Unfortunately, yes -- and the two are related.

If Perry intended to say that a third round of quantitative easing -- the Fed’s program for purchasing Treasury bonds to encourage lending -- was unwise, he may have had an argument.

But he didn’t. He said “printing more money” is close to treason. If he believes this, he either doesn’t understand the Fed’s function, or is a peculiar kind of monetary extremist. As economies grow -- and jobs are created, and demand for goods and services increases, and people have children -- the demand for dollars also grows. To meet this demand, the Fed prints money electronically in good times and bad, under Democratic and Republican presidents. In times of stress, like the last few years, it can add significantly more money to the economy through quantitative easing and other methods.

If the Fed didn’t print any more money at all, we’d soon be relying on a cumbersome and rather inexact form of exchange known as the barter system. Perry surely understands all this.

He also said that printing more money would be “devaluing the dollar in your pocket, and we cannot afford that. We have to learn the lessons of the past three years, that they’ve been devastating.” This would be a more compelling argument if inflation weren’t low by historical standards and unemployment above 9 percent. The Fed’s response to the recession has certainly been aggressive, and not always adequately transparent. But blaming the Fed’s monetary policy for the “devastating” effects of the financial crisis is like blaming the doctor for aggressively treating a smoker’s lung cancer.

Voters may not care as much, but investors, like the chattering class, expect a candidate to know what he's talking about when he talks about the Fed," he said. "It's one thing to oppose what the Fed is doing, but it's another to call it almost treasonous."

The flap may draw the clearest distinctions yet between the Republican establishment and the tea-party ground troops. Mitt Romney, a former private equity executive and the favorite of many Republicans on Wall Street, stayed quiet Tuesday. But last spring he said on CNBC that he wouldn't attack the Fed. "I think Ben Bernanke is a student of monetary policy. He's doing as good a job as he thinks he can do," he said.

Mr. Bernanke, a Republican economist first appointed to the Fed by Republican President George W. Bush and then reappointed by President Barack Obama, doesn't elicit strong opinions in many quarters of the electorate.

In January 2010, as Mr. Bernanke was facing a confirmation fight for a second term, 64% of Americans said they either felt neutral toward him or had no opinion, according to a Wall Street Journal/NBC News poll. Eighteen percent felt somewhat or very negative about him.

But feelings were much stronger among self-identified tea party sympathizers, a third of whom said they felt negatively about the Fed chairman, and half of whom said he shouldn't be granted a second term.

Mr. Perry's critique struck a chord with some voters. "If the words sound harsh and it's the truth, then I'm all for it," said Maureen Saul, a 66-year-old from Cedar Rapids, who drove to Ames this weekend to cast a write-in vote for Mr. Perry.

A parade of mainstream Republicans, however, rushed to criticize Mr. Perry.

Peter Wehner, a top policy maker in George W. Bush's White House, said the governor's comment was "not helpful to our country."

Conservative John Podhoretz, writing in Commentary, labeled the comments "a thoughtless blunder, an unforced error" and "a serious rookie mistake."

"We're now going to spend a couple of days discussing whether he was summoning violence on Ben Bernanke's head or not, which is of absolutely no use to Perry. He is, or was, moments away from becoming the race's frontrunner," Mr. Podhoretz wrote.

Mr. Perry was less sharp-tongued Tuesday. He made a passing reference to the Fed at a business roundtable, saying, "Not only do we have a problem with spending money in Washington, D.C. We have a problem with printing money."

Ray Sullivan, Mr. Perry's communications director, sought to soften the message. "I would just say it was the end of the long day. Today is a new day. But the message about fiscal responsibility is the same and one often repeated in this campaign," he said.

Asked if the campaign would work to keep Mr. Perry more disciplined, he said, "Whenever an individual takes a step and jumps to a new level, whether it's a career business decision or, in this case, political, there are always new things to learn.