The big takeaway from Federal Reserve chairman Ben Bernanke's historic press conference was that the focus, both of questions asked and Bernanke's own remarks, addressed a situation that would be the exact opposite of the one we're in now.
What is our current situation? We have seven million people out of work since the crisis (on top of the number of those who would have been out of work without the crisis). The employment numbers have plummeted for all groups, regardless of education or age. Current estimates say it will take years, 2014 or beyond, before the country approaches a normal unemployment rate.
The Federal Reserve has two jobs, which is often referred to as a dual mandate. One is to maximize employment. Bernanke has testified that there are things the Federal Reserve can do, like buying assets through quantitative easing, that will result in job creation.
However, the Federal Reserve's other job is to maintain price stability and not let inflation spin out of control. The Federal Reserve does that through selecting an inflation rate -- what it calls targeting -- and doing what it takes to maintain that rate. The commodities that are increasing in price, especially oil for gasoline, are being driven by fundamentals, notably demand from China and emerging markets, which are out of the Fed's control. There is very low core inflation, which is inflation on everything other than commodities like oil and food. This core inflation rate is what the Federal Reserve targets, and right now it is lower than what the Fed has targeted.
So the Fed is doing neither of its two jobs. Unemployment is too high, and inflation too low, so it should be doing whatever it takes to stimulate the economy. The natural question that puts pressure on Ben Bernanke is: "Are you worrying too little about unemployment? And are you worrying too much about inflation?"
But if you got all your sense of the world from the questions that were asked during the press conference, you would expect that unemployment wasn't a major problem and crushing inflation was just around the corner.
At the press conference, roughly nine questions worried about inflation, a weak dollar, the country's S&P rating, oil prices, and whether the government can fashion an appropriate response to the financial crisis or long-term unemployment at all. These all reflect the worry that government is doing too much instead of too little. Meanwhile, there were only two questions asking why the Federal Reserve wasn't doing more to lower unemployment. When Binyamin Appelbaum asked, "Is it in the Fed's power to reduce the rate of unemployment more quickly? How would you do that? Why are you not doing it?" it was almost out of place.
Bernanke himself reflected these priorities. He cited keeping the financial sector from collapsing as the extraordinary measure the Federal Reserve has accomplished. He discussed current Federal Reserve efforts as something that will prevent a slow down rather than promote a faster recovery towards the long-term trend of growth. He seemed far more worried about inflation than about the current level of unemployment, and more worried about the Federal government's deficit than putting fiscal policy into play.
Part of the problem has to be that most of the questions were asked by business journalists, who report less on the devastation that unemployment brings and more on the bond and oil markets. But part of the blame goes towards liberals, who haven't pressured Bernanke enough on job creation. Bernanke is a Republican and ultimately he is going to be hawkish on inflation at a time when the exact opposite is needed. We need to demand clearer answers from him as to why he views protecting the financial sector as an ends instead of a means and why he's prioritizing one part of his mandate over the other.
Mike Konczal is a fellow with the Roosevelt Institute and blogs at Rortybomb.