Friday, June 25, 2010

How Did Paul Volker End Up On the Left?

No, seriously. When did this happen?

Paul Volker is now Obama's economic advisor. And the Volker Rule caps banks being able to do... something.

You gotta remember that Volker was Reagan's Fed Chairman. Although he always seemed independent of Reagan (didn't he at one point say something like "We're the only anti-inflationary game in town*"?) he was most famous as an anti-deficit crusader and...

Oh. Right.

Here's a little history lesson for you youngins. Back in the day, in the 1980's, before REM but after Soft Cell, Paul Volker was the Chairman of the Federal Reserve Bank of the United States of America. At the time one might bon mot that he was the second most powerful man in the world, or maybe the most. In that dark and distant past I may have briefly fancied that I'd major in economics, or cultural anthropology, or drop out of school and form a rock band (I'll let you guess which one of those things I actually did).

Now at the time, Reagan-esque Republicans liked to bash Democrats with the "reduce the federal deficit!" line. "We can't afford it, it's irresponsible! Yada blah blah". The Nation properly construed this line of rhetoric to mean "take away all social services and fund the military like crazy", which is largely what Reagan did -- running the deficit up to unprecedented heights while somehow (and, at the time, effectively) blaming the Democrats for the deficit.

Then a fellow named William Jefferson Clinton won the presidency and actually lowered the deficit in that 1990's run when Internet millions were to be had and life was good and money plentiful.

So then came the Big Reversal with George W. Bush. In the 2000's deficit-reduction became a big no-no in the Republican party. Because, um, I guess because that's what the Democrats were doing under Clinton. Which is just the awesomest way to make policy. Reminds me of Theatresource in a way. But anyway -- I forget -- was it Paulson or Snow who had to resign from that balanced-budget organization to become Secretary of the Treasury under GWB? Well, anyway, none of this is my point...

Sometime in the late-ish 1980's I was up at Bard College visiting friends and Volker was speaking. So my friend Todd and I went over hear him. Funny thing was, this was the middle of summer and nobody was there -- there were probably less than 20 eggheads in the audience, Todd, and me. and Paul Volker (this was just after his interview with Interview magazine. Remember that thing? The interview is stupendous. If you find it online you'll see what I mean.)

Todd and I joked about how we were going to ask him questions like "Uh, the bank told me I'm overdrawn -- could you help me balance my checkbook?" But I swear to you, these PhD's in the audience just asked, essentially, for stock tips from him. Todd and I were not allowed to ask questions (they were moderated by Leon Botstein and there was no way he was going to let either of the two of us ask his distinguished guest any questions, probably thinking we'd go on some long socialist rant.) But I had a serious, although perhaps too theoretical-level question regarding the whole ideology of economic thought (so maybe Leon was right.) My question was going to be: "Why do you care so much about inflation?"

Which is a question worth going into some depth for, just not now.

*"We" being the Federal Reserve Bank, which was keeping interest low.

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