Fed's Democrat `Rarity' Is Actually Pretty Common

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"A Rarity: A Democrat to Lead the Fed," read the headline in the New York Times Sunday Review. Look no further than the timeline that accompanied the article to counter the thesis put forth by the Times' David Leonhardt.

If one takes a 26-year window, which encompasses the last two Federal Reserve chairmen, Leonhardt is correct. Alan Greenspan is a Republican. Ben Bernanke is a Republican, although his frequent co-author, Mark Gertler, said in 2005, when Bernanke was being considered for the Fed chairmanship, that he didn't know his friend'spolitical affiliation.

No one could say that about Greenspan, a disciple of Ayn Rand whose policies were anything but libertarian. (See the "Greenspan put.") He willingly offered advice on anything and everything to Congress, something Bernanke promised to avoid and, based on everything I've seen, a promise he's kept.

Back to Leonhardt. The timeline in the Times dates back to 1948, a span when the party affiliation of the Fed chairman was split: 30 years for Democrats, 34 for Republicans. William McChesney Martin, Jr., the longest serving Fed chairman, was a Democrat appointed by Harry S. Truman in 1951. So was Paul Volcker.

Leonhardt's point seemed to be that the ideology of the leader of the central bank "matters enormously." It did under Greenspan, who argued for George W. Bush's tax cuts on the grounds that the 10-year budget surplus was so huge -- an estimated $5.6 trillion in 2002-2011, according to the Congressional Budget Office's 2001 projection -- that the Fed would be hampered in the conduct open-market operations because of a scarcity of Treasury securities.

One can't say the same thing about Bernanke. Yes, he said the automatic, across-the-board spending cuts that went into effect in March were "ill-advised," but so did everyone else. In general, he refrained from advocating fiscal-policy initiatives, "waiting until the last couple of years to make plain his unhappiness with austerity," Leondardt wrote.

I'm not sure that's a fair representation either. Bernanke talked about the contractionary effect of smaller budget deficits, a standard Keynesian view, and acted to counteract it, perhaps continuing asset purchases longer than he would have liked. That's what a Fed chairman is supposed to do: remove himself from fiscal-policy decisions, and use monetary policy to provide an offset.

Leonhardt's point was that both Larry Summers and Janet Yellen are Democrats. Summers has talked about income inequality as the "defining issue of our time," Leonhardt wrote. Yellen has said the disparity between rich and everyone else is "disturbing." Leonhardt concluded that the next person to head the Fed "will bring a different set of beliefs than any chairman in a long time."

Just one small problem: The only thing the Fed can do about income inequality, according to Bernanke, is create jobs. And this Republican Fed chairman has made it clear he's committed to doing just that.

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