Whether or not Jeff Bell comes from behind to win the New Jersey Senate race, he deserves credit for having run a classy, ideas-focused race. That's epitomized by his "closing argument," reproduced below. If a majority of New Jersey voters actually read this email, I do think Bell would win. The media complain a lot about the low quality of campaigns these days—but when an underdog candidate runs a high-quality campaign, they don’t bother covering it. It would be good if some of them acknowledged Bell's attempt to elevate the political discourse.
The middle-class economic squeeze that Bell points to really is an important problem that Republicans need to address. And a rethinking of monetary policy should be part of a GOP growth agenda. Kudos to Bell for taking on a challenge and sounding the tocsin.
As I've been telling you all along, I ran for U.S. Senate in New Jersey because I felt that we were headed for trouble unless we made a major change in the economy. Let me tell you exactly why.
Right now this country is in the slowest economy recovery of our modern history. Growth is tepid, good job openings are scarce, and most working people struggle to get a loan. The most frequent question I've gotten in nine months of campaigning around the state of New Jersey is, Why? Why is the economy stuck in place? Why can't my child who is a recent college graduate find a decent job? Why are my own wages failing to keep up with rising prices?
My answer is that the Federal Reserve for six years has been stepping on the throat of the economy. Its zero interest rate policy, begun in December 2008, is the culprit. Banks are lending to the government rather than small business -- the main source of new job creation -- because of the incentive created by it. Individuals can't earn a return on their savings. We have an economy that wants to recover but is treading water instead.
If we stay in this present course, three outcomes are possible. We could tip into a recession, we could have a market collapse like we had in 2008, or prices could rise dramatically and we would have high inflation. I don't know which is most likely to happen, but unfortunately I believe the Federal Reserve has done things that will cause at least one of the three to happen.
Simply ending the Federal Reserve's zero interest rate policy is not enough by itself, because that has big consequences of its own. If interest rates are allowed to return to normal, that will add about $400 billion to the annual federal deficit. It also could set the stage for a dramatic sell-off of stocks, bonds, and other sources of household wealth that have been artificially juiced by the zero interest rate policy. So ending the Fed's disastrous zero interest rate policy risks the same bad results as keeping it in place.
How do we get out of this straightjacket? I believe we must go back to the gold standard for the first time in 40 years because it contains all of the self-correcting mechanisms for our current situation. A gold-backed dollar would let the marketplace, rather than the Federal Reserve Board, set interest rates and determine the size of the money supply. Instead of watching and worrying what the Fed is going to do, our markets could function knowing that the value of t dollar won't change and interest rates would adjust according to supply and demand for credit.
Just as importantly, going back on the gold standard would embed limited government in Washington. Congress would need to balance its budgets in the long-run when it could no longer rely on the Federal Reserve to continually print money to finance them. Our existing debt could be refinanced at better terms since the dollar we would be using to pay it back would no longer be depreciating due to inflation. And finally, members of Congress would be at the mercy of anti-deficit voters in a way they aren't right now.