The Politics of QE2

A couple of the signers of the open letter to Federal Reserve Chairman Ben Bernanke opposing QE2 were at the Manhattan Institute's party last night for the 20th birthday of City Journal. One of them made the point that there is a petition that members of the public can sign about the issue up at GrowPac.com, and that there's a desire to frame the issue as one of the expansion of the Fed ($3 trillion balance sheet, echoing the expansion of the federal government as a whole) rather than as a mere dispute over the proper monetary policy. Another made the point that regardless of your view of whether there should be a Fed or what its goals should be or even what its monetary policy should be, the debate over QE2 works politically strongly to the benefit of the Republicans, because in order to defend the need for it, Democrats and those who sympathize with the Fed have to talk about how weak the economic recovery is, how many people are still unemployed, and how the federal deficit is so big that there's no room left for any fiscal stimulus — all points that underscore the image of President Obama and Majority Leader Reid as big-spending leaders of a lousy economy.