Let’s stipulate that a candidate whose go-to
rhetorical tic is “gosh” doesn’t need help looking out of date. Even so, Mitt
Romney got some late last week when the GOP platform committee proposed
studying a return to the gold standard, last seen in this country (more
or less) in the early 1930s. The draft of the platform, which will be finalized this week in Tampa, called for a commission to
explore “possible ways to set a fixed value for the dollar”—code for gold.
On the merits, the idea is almost self-evidently
awful, at least if you know a bit about monetary policy (and I confess to only
knowing a little). Using a gold standard means linking the value of the dollar
to the amount of gold in the world. If there’s suddenly too little gold—suppose
something crazy happens, like South African miners go on strike—then there will be too few dollars relative to
the amount of buying and selling going on in the economy. When there are too
few dollars, each dollar becomes more valuable, and people start to hoard them.
Spending slows and the economy collapses.
This is no mere theoretical proposition. It was a
regular feature of the U.S. economy in the 19th and early 20th centuries.
Economists have convincingly argued that the speed with which advanced
economies junked the gold standard determined how quickly they shook off the
Great Depression.
So why, despite the idea’s self-evident
awfulness is the GOP considering it? (Pretty much no mainstream economist is on board.) At first
blush, the explanation looks pretty simple: Ron Paul earned himself a bit of
leverage by racking up almost
200 delegates during the primaries. Being a dedicated hard-money crank, he
decided to put that leverage to work for his pet cause.
But Paul and his quirky followers aren’t the only
GOPers musing about a return to the gold standard. The cause has, in fact,
become something of a mainstream proposition within today’s GOP. Paul Ryan
himself has pushed a proposal that's similar, except arguably more ruinous to the economy. And Republican
Congresswoman Marsha Blackburn, who co-chairs the party’s platform committee,
insisted the gold flirtation didn’t arise as a sop to Paul. “These were adopted
because they are things that Republicans agree on. The House recently passed a
bill on this, and this is something that we think needs to be done,” she told The Financial Times. Even Sarah Palin has piped up with similar sentiments. Though Palin didn’t
explicitly endorse a gold standard, her comments were right out of the hard-money circles
where support for it flourishes.
What gives? For generations, the hard-money issue
has broken down pretty much along class lines. Starchy conservative bankers
loved the gold standard because it generally kept inflation in check and
protected the value of their assets. Poor Midwestern farmers, not so much.
These were people who benefited from inflation, which ate away at their debts,
and who were crushed by deflation, which made their outstanding loans more
expensive. (That whole “Cross
of Gold” speech at the 1896 Democratic convention had something to do with
this…)
On one level it’s no surprise that the
contemporary GOP, a party generally dedicated to the upward redistribution of
wealth, would have a soft spot for an idea like the gold standard. It is, for
example, perfectly in line with Ryan’s other interests, like cutting taxes for
the wealthy by trillions of dollars, slashing domestic spending, and generally
baring his teeth at the poor and weak-minded.
But why would someone like Sarah Palin, who
represents a decidedly more downscale, less educated wing of the GOP, be so
keen? It’s one thing for working-class people to tolerate policies that aren’t
in their interest if they feel they win on balance when the GOP's in power. But
why would they lobby for these policies—particularly when it's a previously
obscure, highly-technical issue like monetary economics? During Rand Paul’s
Senate run in 2010, his supporters were skeptical of a Palin alliance partly
for this reason. “Sarah Palin is an idiot and we don't like her representing
Rand Paul. But it's his choice. We don't have to support everything he does,” said one commenter on a Paul groupie-blog.
So far as I can tell, the Palinites’ recent
interest in hard-money nostrums has nothing to do with the merits and
everything to do with: 1.) pure ignorance (the working class whites devoted to
Palin—they of the underwater mortgages and maxed out credit cards—don’t seem to
understand that inflation is their friend. At least the yeoman farmers of
yester-year could see where their bread was buttered); and 2.) resentment of elites, which is right in their wheelhouse. As
it stands, monetary policy is controlled by the Fed. And what is the Fed if not
a collection of self-important pointy-heads—the very people Palin (and other
GOPers, like Rick Perry) believes have too much control over the country.
Moving to a gold standard would essentially take care of that problem.
Call it the final triumph of the Tea Party
movement: The GOP was already plenty good at convincing working-class whites to
support a form of fiscal policy that catered to rich people. Now they’ve
figured out a similar trick for monetary policy. It’s pure genius.
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