Here is my latest column. Excerpt:
It’s not that anyone is behaving illegally or unconstitutionally,
but rather that Congress seems to want to be circumvented and to
delegate more power to the executive branch as well as to the Fed, at
While Congressional leaders are consulted on
the major policies, Congress is keeping its distance, perhaps to
minimize voter outrage. This way, Congress can claim credit if a
recovery comes, but deny responsibility if the price tag ends up higher
than advertised or if banks seem to be receiving unfair benefits from
The Fed and the FDIC have become the major tools for enhancing executive power and working around Congress:
The traditional division of labor among policy makers was that the Fed
determined the quantity of money in the economy – it set monetary
policy – and Congress decided precise government expenditures – it
handled fiscal policy. These new programs blur that distinction and, in
essence, the Fed is running some fiscal policy.
The FDIC issues guarantees under the expectation that Congress will have to ratify them ex post but ex ante the executive branch is calling the shots.
Is this all good or bad? For any single choice, it is probably good. Congress does not, in general, improve the quality of economic policy, relative to the executive branch. But it is also a kind of deficit spending on the quality of future governance. The more Congress is accustomed to being allowed to punt, the worse Congress will become in the longer run. The executive branch will overreach more and also voters will apply successively more cynical standards to evaluating Congress, leading to a self-fulfilling prophecy.
To put it more concretely, this Congress shies away from accepting responsibility for the various bailouts, yet we think it will somehow solve far tougher problems? I, for one, am worried.