Senate Republicans on Tuesday, like their colleagues in the House last week, expressed concern that the Fed effectively was declaring that it would prioritise job growth over inflation.
“Is the Fed sending a signal that keeping inflation in check is a secondary priority to achieving full employment?” asked Senator Charles Grassley, Republican of Iowa.
“I want to disabuse any notion that there is a priority for maximum employment,” Mr. Bernanke responded.
Instead, he told another questioner, Senator Patrick Toomey, Republican of Pennsylvania, that the Fed’s approach to its dual objectives is “fully balanced and symmetrical.”
As you can see, Bernanke was being deferential to the Senators, but really, this whole line of questioning is ridiculous.
As Ryan Avent notes, unemployment is massive by historical standards, while inflation is running below trend, so we would seriously hope that Bernanke’s focus would be on solving the former. Right now inflation should be secondary, obviously.
So why do so many people flip out about inflation?
Well it’s not because inflation is high. Again, here’s the chart showing that under Bernanke’s tenure, inflation has run below the trend of the last few decades.
The real reason is that worrying about inflation makes people like Chuck Grassley feel young again.
Grassley is 75 years old. The last time inflation was a real problem in the late ’70s/early ’80s, Grassley was in his early-to-mid 40s, a point in his life when he presumably had a lot more testosterone production, and was in much better shape.
BTW: This doesn’t just go for Grassley; there’s a huge crop of supply-siders who came of age under Reagan, who still go on TV all the time whining about inflation, all of whom were at their career/virility peaks during the Reagan/inflation years.
So for them, worrying about inflation is like buying a Lamborghini or marrying a young wife. It makes them feel good and young again.
The impulse is understandable. It’s just scary that it influences policy.