Two Takes on the Fed: NYT and the WAPO

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It is striking to see the difference in the NYT and the WAPO in their discussion of the Fed's track record in the last two years. NYT columnist David Leonhardt raises the obvious point: the unemployment rate is far above anyone's estimate of full employment with no signs of core inflation in sight. The question is why doesn't the Fed do more to spur the economy?

By contrast the Post emphasizes the risk that Bernanke took with his quantitative easing policy. It told readers:

"But the central bank, with its decision last November, also put its reputation on the line, essentially shouldering responsibility for getting the economy on track. In that sense, the Fed now owns the crummy economy in the public mind to a degree that it wouldn’t have had Chairman Ben S. Bernanke and his colleagues followed a more cautious path in setting monetary policy."

Actually it is the Fed's mandate to maintain full employment, so Bernanke really does not have the option to decide to do nothing when the economy faces high unemployment due to a shortfall in demand. The only question is what is the most effective policy to raise demand. If he had opted to do nothing, then he should equally own the economy, assuming that the media reported the situation accurately.

The Post also wrongly asserts that Bernanke has set 2.0 percent as his inflation target. This is his target for the core inflation rate. This point is important because the overall inflation rate has been above 2 percent recently due to sharp increases in energy and food prices. However the core inflation has been just over 1.0 percent.