FDR, MLK, and Absolutism on the Right

-- Posted by Neil H. Buchanan

A few weeks ago, there was a big public relations push for former Reagan budget director David Stockman's new book.  The blitz, complete with an appearance on "The Daily Show with Jon Stewart" and an op-ed in The New York Times, revealed Stockman as a man who has completely lost it -- a Reagan conservative who has migrated to the rightward edge of the political spectrum (and in some ways beyond), complete with claims that we should return to the gold standard, and other fringe views.  On Dorf on Law, Professor Robert Hockett aptly described Stockman as the equivalent of an alien abductee.  That is, Hockett colorfully argued, Stockman has become one of those people who might initially seem sane and even reasonable, but after a few moments of conversation, one realizes that he is someone with whom one should not even make eye contact.

A few days after Professor Hockett's post, I added a few comments on the Stockman screed, in the course of a post that was mostly dedicated to discussing how economists make embarrassing errors when discussing political issues.  Because Stockman is not an economist, his lunacy was illuminating simply because it shows that non-economists can make even bigger fools of themselves, when discussing economic policy.

Lately, however, I have been thinking a bit more about the phenomenon that Stockman now so spectacularly represents: the once-fringe right-wing contingent that wants to eliminate all human control over monetary policy.  This group of extreme movement conservatives, as Professor Hockett described, seems committed to the idea -- in most every policy debate, not just in debates about monetary policy -- that human judgment is to be banished from all public governance.  It is no longer a matter of arguing for conservative policy outcomes, but of structuring our governing institutions so that fallible humans never have the opportunity even to exercise a policy judgment (which will surely be exercised foolishly, according to this crowd).

Although Professor Hockett is right that this anti-judgment bias applies more broadly than merely to monetary policy disagreements, the hyper-right views expressed by Stockman continue to be fascinating even in their original context.  About a year ago, Bruce Bartlett wrote an excellent column on the Times's Economix Blog discussing last year's neo-gold-bug hero, the now-former Congressman Ron Paul.  As Bartlett pointed out, there has long been a genuine split in the conservative movement regarding this most basic question of monetary policy: Should there be no policy discretion at all (the gold bug view), or should the Fed continue to have policy discretion, but either with their mandate limited to a narrower set of goals, or with the Fed being populated with people who will faithfully pursue appropriate conservative goals (the monetarist view)?

Bartlett's post suggested that the Paul camp was once safely marginalized among conservatives, but that it had (at least by May 2012, when Bartlett was writing) emerged as the new orthodoxy among movement conservatives.  With an iconic monetarist like Anna Schwartz calling in 2009 for monetary stimulus (rather than fiscal stimulus, through government spending and tax cuts), growing numbers of conservatives decided that they did not like stimulus at all -- and thus that they no longer liked monetarism.  Stockman's emergence this year suggests that growing numbers of former non-believers are coming on board to the gold bug view.

Therefore, growing numbers of conservatives seem increasingly determined to eliminate the Federal Reserve entirely, or at least to make it little more than something like a "support desk," to make sure that the software is running correctly and that the maintenance personnel show up to work.  When it comes to monetary policy, this now-dominant view among conservatives is that human judgment would only make matters worse.  Even in the midst of a genuine, widespread human catastrophe, the Right's view is once again that nothing should be done to make things better.

This, it seems to me, is yet further proof that the conservative movement has become dominated by people who really, really do not think strategically -- who are so convinced that there is only one right end result that any middle ground is completely unacceptable.  It thus strikes me as another example of the failure of conservatives to understand just how much they should appreciate reformers who make the capitalist system less likely to collapse under the weight of its own excesses.

Scholars have long argued persuasively that capitalists should have LOVED President Franklin Delano Roosevelt.  Faced with the very real possibility that the American people would respond to economic disaster by rejecting modern capitalism outright, FDR made it possible to smooth out capitalism's worst excesses and thus to stabilize the political and economic environment sufficiently to remove the threat of revolutionary change.  Similar arguments have been made, with equal force, about the Rev. Dr. Martin Luther King, who is even easier to see in this light, because of the clear contrast of his nonviolent message with the militant message associated with Malcolm X.  (I have often argued that Bill Clinton and Barack Obama are also examples of this type of political figure: men reviled by the Right, even as they give the Right what it needs most to survive and thrive.)

What makes the anti-Federal Reserve absolutism even more difficult to fathom, however, is that monetary policy is a tool for stabilizing the economy that does not commit the federal government to doing anything to help the "undeserving" moochers so reviled by the far Right.  That is, when the Fed engages in expansionary monetary policy, the effects are felt through indirect financial mechanisms that have nothing to do with providing nutritious lunches to schoolchildren, or job training to unemployed people, or retirement security to people who never earned enough money to build up a sufficient nest egg, or health care for anyone.

By ruling out human-directed monetary policy, the new normal among movement conservatives makes it more likely that the political system will ultimately be forced to adopt aggressive fiscal stimulus to fight a recession/depression.  Prior to 2008, even staunch liberal macroeconomists like Paul Krugman agreed that fiscal stimulus should not be used to stimulate the economy, because monetary policy works more reliably (and with fewer side effects).  Those macroeconomists continue to believe in that basic view, with the key difference being that monetary policy is not currently effective, making fiscal policy our reluctant (and temporary) tool of choice.

Without monetary policy as an available tool in the future, however, the inevitable public clamor for a response to high unemployment in a future crisis would leave policymakers with only one choice: increasing government spending.  Because we would want such spending to be effective and spent wisely, we would generally try to use it to build fiscal institutions that would be addressed to helping all of those moochers.

The realistic alternative to FDR was not pure capitalism.  The realistic alternative to MLK was not rejection of all civil rights laws.  The realistic alternative to Clinton/Obama was not Paul Ryan or Ron Paul.  And the realistic alternative to the Fed is not a world in which the government refuses to respond to people's desires.  By ruling out human-directed monetary policy, the Right increases the likelihood of human-directed fiscal policy, the content of which is infinitely more offensive to their preferences.

Of course, by ruling out monetary policy as an available tool, the Paul-led camp also makes it much more likely that the interim damage will be greater, which means that the ultimate fiscal policy response will be much larger, because the public's appetite for more radical change will be inflamed by much more severe suffering.  Therefore, even though the end result -- the self-marginalization of the conservative movement -- might be an appealing prospect for people like me, the collateral damage is awful to contemplate.