Douglas Holtz-Eakin, Kevin Hassett, and others on November 15, 2010:
An Open Letter to Ben Bernanke: We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment.
We subscribe to your statement in The Washington Post on November 4 that "the Federal Reserve cannot solve all the economy's problems on its own." In this case, we think improvements in tax, spending and regulatory policies must take precedence in a national growth program, not further monetary stimulus.
We disagree with the view that inflation needs to be pushed higher, and worry that another round of asset purchases, with interest rates still near zero over a year into the recovery, will distort financial markets and greatly complicate future Fed efforts to normalize monetary policy.
The Fed's purchase program has also met broad opposition from other central banks and we share their concerns that quantitative easing by the Fed is neither warranted nor helpful in addressing either U.S. or global economic problems.
Douglas Holtz-Eakin, on November 24, 2010, trying to claim that the letter was not the partisan political attack that it was:
Quantitative Easing II: The letter... does not say... anything...that might be genuinely politicizing the Fed.... [T]he issue became “political” the moment that the QE II defenders asserted that it was a political attack. It is disappointing that when presented with a serious critique by academics, think tank analysts, and market participants the immediate response is “it must be a conservative attack on the Fed.” Note that implicitly this also carries the message: “I’d never consider that conservatives have ideas or that I might learn something from them.” So sad...
Kevin Hassett, on November 23, 2010, undermining Doug's claim that the letter was not what it was before Doug said it:
Guest Commentary: I’ve signed many open letters to policy makers over the years. The response to this one was stunning. I was surprised, and remain so, that the letter was criticized so widely and so passionately.... I’ll be the first to admit that the letter may have forfeited some impact because of the obvious Republican bent of the signers, some of whom, shall we say, don’t exactly spend their typical workday immersed in equations...
Doug says--despite its raving about "currency debasement... inflation... broad opposition from other central banks"--the letter is not a partisan attack but rather "a serious critique by academics, think tank analysts, and market participants." Kevin says that the signers were not people qualified to make a serious technocratic critique but rather Republican worthies--and that that made it impossible to read it as a serious technocratic critique.
I am with Kevin. I read this as Brent Scowcroft and Jack Danforth read Republican opposition to START. Scowcroft:
It is not clear to me what [the source of opposition] is. I have got to think that it is the increasingly partisan nature [of the Republican Party] and the desire [by the Republican Party] for the president not to have a foreign policy victory...
If Dick Lugar, having served five terms in the U.S. Senate and being the most respected person in the Senate and the leading authority on foreign policy, is seriously challenged by anybody in the Republican Party, we have gone so far overboard that we are beyond redemption. I am glad Lugar’s there and I am not...
If Douglas Holtz-Eakin wants to make a serious critique of Federal Reserve policy, he should make it in different company--and he should actually make it rather than raving about "currency debasement... inflation... broad opposition from other central banks."