(MoneyWatch) Yesterday was Christmas in Washington, at least for Ron Paul, who will become chairman of the House subcommittee that overseas the Federal Reserve. For Paul, the chairmanship is a pulpit for his crusade against the Fed. For his party, it’s a tell about their strategy for the next two years.
As political theater, giving Paul oversight of the Fed is great casting. He told Bloomberg yesterday that he wasn’t planning to come on strong with his own program for abolishing the Fed. Nor did he say that he would haul Bernanke in front of hearings for a showdown, well, at least not right away:
If next week I issued a subpoena for such and such, I do not think that would be met with good acceptance. It is not like I am a powerful person. My ideas are powerful, but I am not.
For Paul’s ideas to be powerful, they have to be heard. And that’s the real reason behind his appointment. The chairman’s role will be to secure the party’s flank by laying down a steady barrage of fire on the Fed. The goal isn’t to actually reform the Fed — which is a shame because the reliance on the Fed as the only instrument of policy is a big part of what got us in this mess — but pivot the party from attacking the Democrats’ supposed spending as the locus of all our economic ills and re-focus populist frustration where it belongs, on a secretive anti-democratic institution.
This allows the Republican leadership to wield power without having to take the blame for policy. Making the Fed into a ready punching bag — as Paul will happily do — provides an effective way to continue to run against Washington while still being in power.
In essence, the Fed is the Republican’s new “tax and spend.” It will be the standard Republican response to all questions: why won’t you do something about the Fed?
Pointing fingers at the Fed lets the Party of No become the party of “there’s nothing we can do about it,” which will be especially useful now that the Republicans got their other Christmas present early withPresident Obama‘s deal on the Bush tax cuts.
That deal played into Obama’s hands. The tally on the tax deal is fully in Obama’s favor no matter what the left wing of his party thinks. As a bonus, the Republicans gave up much of their moral leverage on deficit reduction. No matter. Here’s where Ron Paul’s chairmanship comes into play.
No one but Paul would be as indefatigable in badgering the Fed. Nor could any party operative provide the sincerity and zeal that the loopy Ron Paul has for attacking the Fed. Since hearings and soundbites are all the leadership seems to be after, Paul is the perfect partisan tool.
He will continue to coin his own anti-Fed rhetoric which will, in turn, be popularized by Sarah Palin. Obama, for his part, will hope that the stimulus he’s gotten in the tax deal will combine with the existing economic improvement to carry him to re-election. Meanwhile, he’ll keep playing rope-a-dope with the Republican leadership hoping to out maneuver them into taking ownership of any economic unpleasantness.