Sympathy for Bernanke by Ryan Avent

BINYAMIN APPELBAUM reports today from a meeting of the Senate Budget Committee, which played host to Federal Reserve Chairman Ben Bernanke:

“It seems to me that you care more about unemployment than about inflation,” said Senator Charles E. Grassley, Republican of Iowa.

“I want to disabuse any notion that there is a priority for maximum employment,“ Mr. Bernanke responded.

Instead, he told another questioner, Senator Patrick J. Toomey, Republican of Pennsylvania, that the Fed’s approach to its dual objectives is “fully balanced and symmetrical.”

Mr. Toomey responded that that was exactly what he had expected Mr. Bernanke to say, but he did not seem pleased about it.

The most that core consumer prices have risen in a 12-month period since Mr Bernanke took over is just 2.9%—and that was in 2006, when he'd had less than a year in the top job. Since the financial crisis of late 2008, core prices have risen no faster in a 12-month span than 2.2%. During the second half of 2010, annual inflation stood at its lowest level in over half a century. Unemployment, by contrast, peaked at 10.0%. Only once in the post-war period did the jobless rate rise above that level. Only twice in the postwar period has the country experienced a recession that brought the unemployment rate above its current level, at 8.3%—the downturns of 1973-75 and 1981-82. I'm left to muse that Mr Grassley must say good-bye when he enters a room and hello when he leaves, and wears his shoes on his head. 

Of course, Mr Toomey would be justified in being displeased with Mr Bernanke's "fully balanced and symmetrical" remark. It's wrong; for nearly four years the Fed has been at or below its inflation target while unemployment soared above the natural rate and stayed there. The Fed is failing to meet its dual mandate and deserves to be criticised. Yet these gentlemen aren't unhappy about the actual failures of Fed policy; they're angry about the statistics in some bizarre alternate reality in which the Fed has allowed inflation to run out of control in an effort to maximise employment. They might as well threaten to hold hearings on his troubling habit of hunting down and dining upon unicorns; it would make as much sense.