If you thought Ryan's fiscal policy was bad, wait til you see his monetary policy

"Sound money", raising interest rates and Ayn Rand: he's got it all.

Now that Paul Ryan is coming under the sort of scrutiny which a member of the House of Representatives never gets – even a rising star saying all the right things – his reputation as a serious man with serious thoughts is falling apart.

Take the re-examination of his proposal, in 2008, to redefine the mandate of the Federal Reserve. Not problematic in itself; lots of people want to redefine the mandates of central banks. The most popular demand is insisting they switch from targeting low inflation to targeting nominal growth.

But Ryan wanted to change the Fed's mandate from its current dual requirement, to aim for low inflation and full employment, to one which only requires low inflation. He already clearly disapproves of fiscal stimulus, but it appears that he disapproves of monetary stimulus as well.

And in 2010, his explanation to Ezra Klein of how he would use monetary policy to help the economy was bizarre and plain wrong:

There’s a lot of capital parked out there, and we need to coax it out into the markets. I think literally that if we raised the federal funds rate by a point, it would help push money into the economy, as right now, the safest play is to stay with the federal money and federal paper.

As Mark Thoma puts it:

Basically, they are telling us that if a recession hits and they have their way, nothing will be done. Not a thing. No fiscal policy response (except perhaps austerity to make it worse), and no monetary response (except, if Ryan has his way, interest rate increases based upon a misunderstanding of how the economy works that would also make things worse).

Brad Plumer explains how the real heart of Ryan's monetary policy "isn’t quite a return to the long-abandoned gold standard, but it’s a roughly similar concept": anchoring the value of the dollar to a basket of commodities.

This is wingnut thinking, which Plumer argues can all be traced back to Ryan's love of Ayn Rand's terrible novel Atlas Shrugged:

In the passages that Ryan has highlighted, Rand’s characters lament that statists have destroyed all “objective standards” for currency by abandoning the gold standard and boosting the supply of paper money in order to assist the “looters and moochers.”

None of this is new; the writing was on the wall four years ago. But whereas proposing complicated-sounding economic measures is enough to get you a reputation of sorts in the House of Representative, it oughtn't be enough to maintain that reputation once you hit the big leagues. But Paul Krugman argues that the real reason for the Ryan pick is his uncanny ability to do just that:

Whence comes the Ryan reputation? As I said in my last post, it’s because many commentators want to tell a story about US politics that makes them feel and look good — a story in which both parties are equally at fault in our national stalemate, and in which said commentators stand above the fray. This story requires that there be good, honest, technically savvy conservative politicians, so that you can point to these politicians and say how much you admire them, even if you disagree with some of their ideas; after all, unless you lavish praise on some conservatives, you don’t come across as nobly even-handed.

And yet, implausibly, the Romney/Ryan ticket could, in the very short-term, be the best economic choice America has. Joe Weisenthal makes the case:

The biggest threat to the U.S. economy is the fiscal cliff. As Morgan Stanley's Adam Parker explained in a note today, there's a very plausible scenario where 5 percent of GDP is lopped off, and corporate profits get absolutely shredded. And this assumes that the debt ceiling is passed without creating a gigantic shock to the economy.

The best scenario for avoiding a fiscal cliff mess is to see Mitt Romney elected. As we argued back in early April, the surest way to get Republicans on board with ongoing deficits is for them to be the party in power again.

History seems to be pretty clear on one issue: Parties out of power favor austerity. Parties in power favor stimulus.

Weisenthal goes on to quote Josh Barro trying to guess Ryan's role in Romney's economic plan:

Conservatives are never fully going to trust Romney. If he comes to them with, say, economist Glenn Hubbard’s proposal to throw about a hundred billion taxpayer dollars at restructuring underwater home mortgages, they’re likely to resist.

But what if Vice President Paul Ryan makes the pitch? Won’t House Republicans be much more likely to conclude that mortgage bailouts actually are conservative?

I’m not suggesting that Ryan is going to throw conservatism entirely under the bus. Romney surely wants to do some things that Republicans in Congress will love and others they will be resistant to—only part of his economic plan is secret. So both sides of Ryan’s skill set will come into play.

In the end, even when a scenario is presented in which Ryan is actually good for the economy, it all comes back to his surface appeal. The man looks competent; he looks like a conservative, like someone who can be trusted, who has thought through his opinions, and hasn't based economic policy on a 55-year-old sci-fi novel.

He isn't, of course. But when's that ever stopped anyone?

Paul Ryan meets a baby. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Getty
Show Hide image

Find the EU renegotiation demands dull? Me too – but they are important

It's an old trick: smother anything in enough jargon and you can avoid being held accountable for it.

I don’t know about you, but I found the details of Britain’s European Union renegotiation demands quite hard to read. Literally. My eye kept gliding past them, in an endless quest for something more interesting in the paragraph ahead. It was as if the word “subsidiarity” had been smeared in grease. I haven’t felt tedium quite like this since I read The Lord of the Rings and found I slid straight past anything written in italics, reasoning that it was probably another interminable Elvish poem. (“The wind was in his flowing hair/The foam about him shone;/Afar they saw him strong and fair/Go riding like a swan.”)

Anyone who writes about politics encounters this; I call it Subclause Syndrome. Smother anything in enough jargon, whirr enough footnotes into the air, and you have a very effective shield for protecting yourself from accountability – better even than gutting the Freedom of Information laws, although the government seems quite keen on that, too. No wonder so much of our political conversation ends up being about personality: if we can’t hope to master all the technicalities, the next best thing is to trust the person to whom we have delegated that job.

Anyway, after 15 cups of coffee, three ice-bucket challenges and a bottle of poppers I borrowed from a Tory MP, I finally made it through. I didn’t feel much more enlightened, though, because there were notable omissions – no mention, thankfully, of rolling back employment protections – and elsewhere there was a touching faith in the power of adding “language” to official documents.

One thing did stand out, however. For months, we have been told that it is a terrible problem that migrants from Europe are sending child benefit to their families back home. In future, the amount that can be claimed will start at zero and it will reach full whack only after four years of working in Britain. Even better, to reduce the alleged “pull factor” of our generous in-work benefits regime, the child benefit rate will be paid on a ratio calculated according to average wages in the home country.

What a waste of time. At the moment, only £30m in child benefit is sent out of the country each year: quite a large sum if you’re doing a whip round for a retirement gift for a colleague, but basically a rounding error in the Department for Work and Pensions budget.

Only 20,000 workers, and 34,000 children, are involved. And yet, apparently, this makes it worth introducing 28 different rates of child benefit to be administered by the DWP. We are given to understand that Iain Duncan Smith thinks this is barmy – and this is a man optimistic enough about his department’s computer systems to predict in 2013 that 4.46 million people would be claiming Universal Credit by now*.

David Cameron’s renegotiation package was comprised exclusively of what Doctor Who fans call handwavium – a magic substance with no obvious physical attributes, which nonetheless helpfully advances the plot. In this case, the renegotiation covers up the fact that the Prime Minister always wanted to argue to stay in Europe, but needed a handy fig leaf to do so.

Brace yourself for a sentence you might not read again in the New Statesman, but this makes me feel sorry for Chris Grayling. He and other Outers in the cabinet have to wait at least two weeks for Cameron to get the demands signed off; all the while, Cameron can subtly make the case for staying in Europe, while they are bound to keep quiet because of collective responsibility.

When that stricture lifts, the high-ranking Eurosceptics will at last be free to make the case they have been sitting on for years. I have three strong beliefs about what will happen next. First, that everyone confidently predicting a paralysing civil war in the Tory ranks is doing so more in hope than expectation. Some on the left feel that if Labour is going to be divided over Trident, it is only fair that the Tories be split down the middle, too. They forget that power, and patronage, are strong solvents: there has already been much muttering about low-level blackmail from the high command, with MPs warned about the dire influence of disloyalty on their career prospects.

Second, the Europe campaign will feature large doses of both sides solemnly advising the other that they need to make “a positive case”. This will be roundly ignored. The Remain team will run a fear campaign based on job losses, access to the single market and “losing our seat at the table”; Leave will run a fear campaign based on the steady advance of whatever collective noun for migrants sounds just the right side of racist. (Current favourite: “hordes”.)

Third, the number of Britons making a decision based on a complete understanding of the renegotiation, and the future terms of our membership, will be vanishingly small. It is simply impossible to read about subsidiarity for more than an hour without lapsing into a coma.

Yet, funnily enough, this isn’t necessarily a bad thing. Just as the absurd complexity of policy frees us to talk instead about character, so the onset of Subclause Syndrome in the EU debate will allow us to ask ourselves a more profound, defining question: what kind of country do we want Britain to be? Polling suggests that very few of us see ourselves as “European” rather than Scottish, or British, but are we a country that feels open and looks outwards, or one that thinks this is the best it’s going to get, and we need to protect what we have? That’s more vital than any subclause. l

* For those of you keeping score at home, Universal Credit is now allegedly going to be implemented by 2021. Incidentally, George Osborne has recently discovered that it’s a great source of handwavium; tax credit cuts have been postponed because UC will render such huge savings that they aren’t needed.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 11 February 2016 issue of the New Statesman, The legacy of Europe's worst battle