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July 24, 2013 4:27 PM The Missing Piece

By Ed Kilgore

One criticism of the president’s Knox College speech I agree with was best articulated by Matt Yglesias:

The two big economic policy stories of the day are the president’s speech on his vision for long-term economic prosperity and the president’s decision about whom he’ll nominate to replace Ben Bernanke to run the Federal Reserve. Predictably—but very oddly—Obama didn’t mention this decision at all in his speech.
Which is strange because it’s not as if it’s irrelevant. Obama clearly indicated an aspiration to accelerate the pace of job growth and talked about “new rules on big banks.” Lots of elements of the government outside the Federal Reserve play a role in regulating banks, but the Fed is a major bank regulator. Lots of things that happen in public policy are relevant to job creation, but the Federal Reserve is the lead agency in macroeconomic stabilization. I don’t expect politicians to dwell on monetary policy issues on a day-to-day basis, since on a day-to-day basis they’re outside of their hands. But Elizabeth Duke’s resignation from the Board of Governors creates a vacancy Obama needs to fill. Ben Bernanke is going to need to be replaced. And there’s talk that Sarah Bloom Raskin is going to move to the Treasury Department as deputy secretary, which would create another vacancy on the board. So there’s a real question here worthy of presidential attention.

I’d add that the power to shape the Fed is far more in Obama’s hands than, say, the ability to secure public investments from a divided Congress or even to make sure the Affordable Care Act is implemented as was originally intended (you know, back before the Supreme Court let states sabotage the Medicaid expansion).

But let’s remember that this was just the first of a series of presidential speeches. And besides, maybe appointing a more aggressive Fed chairman was part of what Obama had in mind when he said today:

That means whatever executive authority I have to help the middle class, I’ll use it.
Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

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