In what is just the latest in the war of the words between the nation’s top liberal economist and the nation’s top central banker, Nobel Prize-winning economist Paul Krugman took Federal Reserve Chairman Ben Bernanke to task on “This Week” today, saying the head of the Fed has been “assimilated by the borg” and should be doing more to address the high unemployment in the country.
“I think what’s happened to Bernanke, as they say, he’s been assimilated by the Borg, he’s become — he’s become more concerned, probably unconsciously, with defending the Fed’s institutional safety, because it’s the apostle of price stability, than with doing whatever he can to get this economy moving. Which if he’d listened to Professor Bernanke, himself ten years ago, he would know that he was supposed to be doing more, ” said Krugman, a columnist for The New York Times. “We’ve defined recklessness the wrong way. We think that anything that rocks the boat and is not certain in its outcome would be reckless. But actually allowing unemployment to stay near 9 percent, allowing the number of long-term unemployed to be 4 million, which it hasn’t been since the 1930s, which is destroying skills, destroying the attachment of workers to the workforce.”
The spat between the two economists erupted earlier this week when The New York Times Magazine published an article online by Krugman titled “Earth to Ben Bernanke.” In it, Krugman essentially argues that there is a disparity between the type of action during a financial crisis that Ben Bernanke advocated for before he became head of the Federal Reserve and the action Bernanke has actually taken during his tenure as chairman. Given this, Krugman assigns some blame to Bernanke for the ongoing suffering of many Americans.
“While the Fed went to great lengths to rescue the financial system, it has done far less to rescue workers. The U.S. economy remains deeply depressed, with long-term unemployment in particular still disastrously high, a point Bernanke himself has recently emphasized. Yet the Fed isn’t taking strong action to rectify the situation,” wrote Krugman. “The Bernanke Conundrum — the divergence between what Professor Bernanke advocated and what Chairman Bernanke has actually done — can be reconciled in a few possible ways. Maybe Professor Bernanke was wrong, and there’s nothing more a policy maker in this situation can do. Maybe politics are the impediment, and Chairman Bernanke has been forced to hide his inner professor. Or maybe the onetime academic has been assimilated by the Fed Borg and turned into a conventional central banker. Whichever account you prefer, however, the fact is that the Fed isn’t doing the job many economists expected it to do, and a result is mass suffering for American workers,” he wrote.
Bernanke was asked about Krugman’s article – albeit not directly – by reporter Binyamin Appelbaum. In his response, Bernanke argued that his own actions as head of the Federal Reserve have been consistent and that those who argue otherwise are “absolutely incorrect.”
“There’s this view circulating that the views I expressed about 15 years ago on the Bank of Japan are somehow inconsistent with our current policies. That is absolutely incorrect. My views and our policies today are completely consistent with the views that I held at that time,” said Bernanke.
Krugman responded in a blog, writing “I see it, in effect he (Bernanke) declared that he has been assimilated by the Fed Borg” and called Bernanke’s response “disappointing.”