Tom Pauken and Bill Murchison are two Dallas conservatives with a national audience and clout. Usually they agree but on the President's appointment of Ben Bernanke to head the FED they sharply divide. Murchison says thank God its Bush and Bernanke while Pauken sees very bad times ahead stemming from likely Bernanke policies.
VIEW ONE: BERNANKE SELECTION IS A HOME RUN
By Bill Murchison
William MurchisonIn our fragmented, minute-by-minute universe we get to thinking of the President the United States, a certain George Bush, as the man who blew the Big Blow rescue operation in New Orleans, nominated a crony to the Supreme Court, and now may lose his arch political strategist over the Judith Miller/Valerie Plame affair.
Out of the air comes the appointment of Ben Bernanke to succeed Alan Greenspan as Grand Keeper of Economic Prosperity, and the market reminds us of how much more presidents do than just get in trouble with partisan rivals and the news media.
The market quickly signaled its deep approval of Bernanke, the president’s chief economic adviser, and of the prospects for his acting with wisdom and prudence as chairman of the Federal Reserve Board. That is to say, the market danced in the street. It uncorked champagne bottles. It made whoopee.
Which is what markets do when the president of the United States acts maturely and in the interest of freedom.
The Wall Street Journal, which mussed up Bush a little last week for his Miers nomination, will surely be leading over time the cheering section forming to welcome to the Fed chairmanship an economist of unmistakably pro-freedom, pro-common sense credentials.
And the point? I knew you’d ask. The point is surely that, whereas Bush’s red-state conservative constituents occasionally seem ready to throw him to the lions that might not be real smart.
My sermon today is of human imperfection, and how, in politics when you can’t get everything you want, when you want it, you just plow ahead, because sometimes in the furrow you turn up a Ben Bernanke -- a nobler find than you would expect had John Kerry or Al Gore hitched up the team. We never get all we want from a president. I am talking of my fellow conservatives, you will understand. As for the apostles of regulation, government meddling, and faux equality -- the liberals, that is -- they’ll have to look out for themselves.
Memory inclines me to this view. As a teenager, I saw Dwight Eisenhower frustrate the anti-New Dealers who had expected more of the first Republican president in two decades. We jumped all over Ronald Reagan for not downsizing spending or government. In retrospect we’re happy enough to honor him for cutting taxes and winning the Cold War.
I had been meditating on these matters while the lynch mob was forming up for Harriet Miers and the Iraqi insurgents were planning their next hit job, and the special prosecutor was eying Karl Rove for alleged complicity in outing a supposed undercover agent opposed to the Iraq war. I think a lot of people had been similarly meditating. A lot has lately gone wrong for Bush. I had predicted his stars might realign.
So have they? Hard to tell. I would say only that when a mega economic task comes up, it helps to have a president in charge who, in economics, is more Reagan than he is Al Gore. For blessings of this sort we might consider -- down as we get on Bush sometimes -- demobilizing the attack vehicle for, oh, 15 minutes or so. I suppose it must be a function of age. I find it harder and harder to get mad and stay mad at politicians over the human stupidities for which they fall. I admire those who fall less often and less hard than others. In the end, none has quite the power and vision, and even luck, which supporters ascribe to him.
No democratic political leader hits a home run every time at plate. More often the box score records bunts, infield singles, and the occasional foul-out.
Ben Bernanke is a home run: that we know. The batter was Bush. We grumbling conservatives might still wish Reagan were in the White House. But he’s not, and we’re not necessarily doing as badly as we sometimes think -- I mean, given some of the alternatives.
VIEW TWO: NO, IT’S NOT
By Tom Pauken
Tom PaukenWall Street was nearly as ecstatic yesterday as Bill Murchison was over the President’s selection of Ben Bernanke to succeed Alan Greenspan as chairman of the Federal Reserve Board. And, it showed as the Dow was up nearly 170 points while NASDAQ climbed more than 33 points. I have to believe that Wall St. traders responded so positively to the Bernanke selection because they believe that Bernanke will keep the music going just like Greenspan has for the past decade as our economy has gone from the tech bubble to the present day real estate bubble. In my esteemed colleague’s words, Alan Greenspan was the “Grand Keeper of Economic Prosperity;” and it will be up to Bernanke to keep the latest bubble from bursting and leading the way into a severe recession or, possibly, even a depression.
If you like Greenspan, you will love Bernanke. As Danielle DiMartino noted this morning in a column in the Dallas News on the Bernanke pick, the President’s nominee to be Fed Chairman vowed in 2002 “to drop money from a helicopter” if need be to fight the risks of deflation. (No kidding – he said it.) DiMartino, who (in my opinion) is one of the finest economic writers in the daily newspaper world, recounted Bernanke’s rather strange statement recently about there being a global “savings glut”. In DiMartino’s words, “the rest of the world’s propensity to oversave, he (Bernanke) opined, rather than the tendency of the U.S. to overspend, is at the root of the imbalances in the global economy.”
Forgive me, but I don’t buy into Bernanke’s analysis. I believe our problem in the U.S. is that we have a credit excess and savings shortfall, a lethal combination which is bound to lead to a major economic shakeout in the not too distant future.
Nor do I concur in the conventional wisdom that Alan Greenspan has been a great Fed Chairman. My sentiments echo those expressed by James Grant in the October 31st issue of Forbes magazine: “The public worships Alan Greenspan for his oracular wisdom. But what is his legacy? It includes a crazy housing market, overextended consumers and a burst stock bubble.” By keeping interest rates artificially low, Greenspan has propped up the real estate asset bubble and kept it going. By my reckoning, Greenspan is “getting out of Dodge” just in time – before the music stops.
My own preference for fed chief would have been the President’s first economic advisor Lawrence Lindsey who understands the dangers of credit excess far better than either Greenspan or Bernanke. But Lindsey got himself in trouble with the Administration by saying the War in Iraq would cost the U.S. a couple of hundred billion dollars. He was right, of course. But, Lindsay lost his job anyway for saying so in public and apparently never regained the President’s confidence.
My esteemed colleague, Mr. Murchison, makes it sound like the Bernanke appointment is what Ronald Reagan might have done. Perhaps, he forgets that the Fed Chairman during most of the Reagan years was Paul Volcker who tightened the money supply in order to get inflation under control while Greenspan inflated the money supply whenever the markets were in trouble. By the way, Volcker is very worried about the state of the American economy and fears we are heading into dangerous waters. Our own resident economist, Carl Pellegrini, goes to the horse’s mouth and quotes Bernanke as saying: “we still have accommodative fiscal and monetary policy picking up.” It sounds to me like Bernanke is saying: keep the spickets open – we’ll worry about inflation later.
Bill Murchison and I agree on most issues; but, on the Bernanke appointment, we are poles apart.