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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

It’s the Fed, Stupid

It’s sometimes said that the Chairman of the Federal Reserve has more power over the economy than the President. Agree or disargee, there’s an interesting discussion going on at Angry Bear, lead by ‘Cactus,’ about whether/how much the Fed Chairman influences or tries to influence election outcomes. The debate about the “political businesss cycle” has been going on for decades, and Cactus weighs the evidence, brings readers up to speed and in the latest installment notes:

…for whatever reason, in the four consecutive close elections during the Greenspan era, there were unusually large changes in the levers that the Fed controls. One might call it coincidence, or one might note that these movements seemed designed to benefit the Republican candidate…Enough people were incensed that the 2000 elections were, in effect, decided by the Supreme Court. Do we want the 2008 elections decided by Ben Bernanke?

In terms of political strategy, the salient point for Dems may be to assume that, when Republicans control the Fed and the white house, there will be a hefty cash infusion into the economy in the months leading up to an election — and plan accordingly.