Ben Bernanke Is Fed Up: The former Fed chair says he's no longer a Republican because the GOP has lost its economic policy mind

It's the stupid economics. That's why he's no longer a Republican, former Federal Reserve Chairman Ben Bernanke tells us in his new memoir. Bernanke says he "lost patience with Republicans' susceptibility to the know-nothing-ism of the far right." Here's part of his indictment:

They saw inflation where it did not exist and, when the official data did not bear out their predictions, invoked conspiracy theories. They denied that monetary or fiscal policy could support job growth, while still working to direct federal spending to their own districts. They advocated discredited monetary systems, like the gold standard.

Bernanke's right; these views aren't conservative – they're kooky. Members espousing them may have made Bernanke's interactions with Congress uncomfortable, but they couldn't stop the Fed from using extraordinary monetary policy measures to try to pull the economy out of the Great Recession.

Fiscal (tax and spending) policy was another story, however. 

In Bernanke's harsh but accurate judgment, "fiscal policymakers, far from helping the economy, appeared to be actively working to hinder it." He's talking about Republican congressional efforts to use "must pass" legislation – e.g., raising the legal limit on total federal debt or approving annual spending bills to fund the government – as bargaining chips to achieve deep cuts in government spending, even when the economy is weak.

Like anyone who understands the issue, Bernanke notes that refusing to raise the debt limit isn't about controlling spending, it's about government not paying its bills: "It is like a family running up large credit card bills and then refusing to pay." We can forgive the public for not understanding this, but not its elected representatives. To Bernanke, nothing justifies taking the economy hostage by refusing to raise the debt limit. He's right; the best thing to do with the debt limit is scrap it so that government can pay its bills on time, unimpeded by political shenanigans.

President Barack Obama and the Congress resolved the 2011 debt-ceiling crisis by enacting the Budget Control Act, which imposed tough spending limits and required further "sequestration" spending cuts when Congress couldn't agree on a deficit-reduction plan. Bernanke "was relieved to see a resolution of the crisis, but worried about whether the fragile economic recovery could withstand the austerity measures that Congress seemed intent on imposing."

In Bernanke's diagnosis, reflecting his mainstream economic thinking, fiscal policymakers put the recovery at risk when, after enacting Obama's stimulus package in early 2009, they shifted into austerity mode. At the same time, state-level balanced-budget requirements forced a sharp drop in public-sector employment. (Typically, government employment rises in a recovery.) Tight fiscal policies, Bernanke wrote, "were arguably offsetting much of the effect of our monetary efforts" and making it difficult to achieve the Fed's full employment goal. 

Nevertheless, Republicans continued to advance discredited "expansionary austerity" arguments. Bernanke advanced the mainstream view: Congress needed to focus its deficit fighting on the long-term fiscal challenge; too much austerity too soon "would only slow the recovery without solving the longer-run problem."

Republican budget proposals reflected hard-right priorities that, if enacted, would have derailed the recovery. Obama's and the Senate Democrats' budget proposals, in contrast, never reflected far-left policy priorities. Rather, they looked like centrist proposals that would emerge from good-faith bargaining between the two parties. They were more timid on both short-term stimulus and longer-term deficit reduction than what Bernanke and other mainstream analysts hoped to see, but at least they went in the right direction.

It wasn't pretty, and the economic recovery is taking much longer than it needed to. But the recovery wasn't derailed, partly because Republican leaders haven't wanted another debt-ceiling showdown or government shutdown for fears that it would hurt them at the polls.