The Federal Reserve is tasked not only with combating inflation, but also with a mandate to keep unemployment low. It’s the latter responsibility that congressional Republicans don’t like.
Back in November 2010, GOP officials were so concerned that the Fed might try to lower the unemployment rate they called for legislation to change the Federal Reserve’s mandate – the Board of Governors could think about inflation, but would be expected to ignore jobs.
Nearly a year-and-a-half later, the Republican fear that the Fed might lower unemployment hasn’t gone away.
Congressional Republicans criticized the Federal Reserve on Thursday for working to reduce unemployment and revive the housing market rather than maintaining a single-minded focus on inflation.
The Fed’s chairman, Ben S. Bernanke, was sharply questioned by members of a House committee about the Fed’s announcement last week that it plans to hold short-term interest rates near zero until late 2014, a measure that the Fed described as necessary to support a faster pace of economic recovery.
That’s right, GOP officials have noticed that the Fed is interested in addressing unemployment, and it wants this to stop as soon as possible.
Republicans aren’t arguing that the Fed is bad at lowering unemployment, and they’re not arguing that the Fed is incapable of lowering unemployment; GOP lawmakers are saying the Fed shouldn’t even try to address the jobless rate in the midst of a jobs crisis.
What matters, Republicans argued today, is largely non-existent inflation, and the possibility that inflation may become a problem at some point in the future. This fear, GOP officials argued, takes precedence over 8.5% unemployment.
The last time Republicans demanded the Fed ignore the jobless rate, Steven Pearlstein noted, “It’s not exactly clear how unemployed workers would benefit from the Fed’s benign neglect.”
The answer, of course, is that unemployed workers wouldn’t benefit at all.