Paul Ryan and the Federal Reserve
The Congressman from Wisconsin, who is most known for his laissez-faire budget proposals, is also celebrated or reviled in more nerdish circles for his supposedly unwavering support of a laissez-faire approach to monetary policy – “my first love,” as he once described it.
In 2008, he sponsored legislation designed to strip the Federal Reserve of its full employment mandate. He has also characterized expansionary monetary policy as “insidious” and favored by those with “a narrow view of interest.”And in response to quantitative easing in November 2010, Ryan blasted the Federal Reserve, saying“[it’s] going to give us a big inflation problem down the road.”
But WikiLeaks Cablegate disclosures indicate that what Ryan says about monetary policy behind closed doors doesn’t always comport with what he says in public. His supposedly rigid ideology might be more malleable than popular lore indicates.
For example, Ryan, in a meeting with Argentine legislators in earlyJanuary 2009, “cited monetary policy and protecting jobs as critical issues that consume the attention of the U.S. Congress.” It doesn’t exactly sound like the sort of thing a true believer in austerity might say.
And in another meeting with then Argentine Cabinet Chief Minister Sergio Massa in late December 2008, Ryan’s criticism of contractionary monetary policy and a hands-off approach was even more penetrating (emphasis mine):
Rep. Ryan noted that among the many tools being deployed to address the crisis, careful attention was being paid to monetary policy, which previously had sought to contain inflation but now needed to target potential deflation. He called “historic” the Federal Reserve’s decision the previous day to lower interest rates to near zero. Ultimately, the important thing was to fix the financial system by requiring greater transparency and to keep speculation from spinning out of control … Rep. Ryan recalled that Federal Reserve Chairman Bernanke was one of the most prominent scholars of the Great Depression in the 1930s, and that two lessons he had drawn from Bernanke’s academic work were the negative consequences in this type of crisis of taking liquidity out of the system and of enacting protectionist measures.