Bush Taps a Consensus Candidate for the Fed

Pre

sident Bush's nomination of Ben S. Bernanke to replace Fed chairman Alan Greenspan seems — so far, at least — mercifully free of controversy. The U.S. stock market rallied on the announcement, as foreign-exchange buyers drove up the value of the dollar against the Euro and other currencies. Market reaction reflects Bernanke's status as conservative, but hardly radical economist, whose views on inflation, taxes, interest rates and monetary policy are not deemed markedly different from those of Greenspan.

If it were compared to President Bush's supreme court picks, the nomination of Bernanke — a Princeton University economist and member of the Fed board from 2002 to 2005 — is more akin to that of the savvy Chief Justice John Roberts than to the relative inexperience of the embattled Harriet Miers.

Bernanke, whose father ran a small-town pharmacy in South Carolina, taught himself calculus, achieved the highest SAT scores in the state, and later earned a doctorate from MIT. There he met his wife Anna, with whom he has two children.

Like Miers, Bernanke has, since moving over from the Fed in June, been a solid member of Bush's White House team, as chairman of the President's Council of Economic Advisors. In that capacity, he has been obliged to defend administration spending policies that have dramatically increased the deficit — so much so that they are viewed by a significant minority within the GOP as excessive, and out of step with the party's traditional emphasis on fiscal discipline.

By the same token, supply-siders on the Republican right regard Bernanke with suspicion. A recent critique of Bernanke in the online edition of the conservative National Review labeled him a "Keynesian" who believes in the "limits" of growth, and portrayed him as a central banker unlikely to support more and deeper tax cuts. As National Review put it, "Much right now is being made of President Bush's historic chance to remake the Supreme Court. No doubt that's true. Perhaps just as important will be Bush's Federal Reserve appointments, foremost of which will be Alan Greenspan's replacement. For his views on taxes and growth limits alone, Bernanke would be a big step in the wrong direction."

Just as President Bush brushed aside demands from his party's right wing in his recent nominations to the Supreme Court, the White House has chosen a similar path in relation to the Fed, selecting a relative moderate with a strong chance of winning confirmation. Key Democrats on the Senate Finance Committee, which must approve Bernanke's nomination, have already given his candidacy a cautious welcome. "We need a careful, non-ideological person who understands that the Federal Reserve's main job is to fight inflation, and Ben Bernanke seems to fit that bill," said Sen. Charles Schumer, who sits on the panel. Schumer did criticize Bernanke, however, noting that as top White House economic advisor he had come out in favor of the extending the Bush tax cuts at a time when a "a voice for fiscal restraint and moderation will be much-needed."