By now, there are a few hard-and-fast rules about the debates for the 2012 Republican presidential nomination: businessman Herman Cain will mention his 9-9-9 plan at every opportunity, Texas Gov. Rick Perry will focus on energy (almost to a fault), and Federal Reserve Chairman Ben Bernanke will take a beating.
Such was the case again at last night's debate in Hanover, N.H., when candidates such as former House Speaker Newt Gingrich, former Massachusetts Gov. Mitt Romney, Texas Congressman Ron Paul, and Cain all stated their intention to fire the Fed chairman, who was appointed by George W. Bush.
But last night, Bloomberg TV's Julianna Goldman pushed candidates beyond this talking point, asking, "[W]hich Federal Reserve chairman over the last 40 years do you think has been most successful and might serve as a model for that appointment?"
The two candidates who responded, Cain and Paul, offered revealing answers that may invite future criticism. Referencing his own time at the Kansas City Fed in the 1990s, Cain chose Alan Greenspan, who served as Fed Chairman from 1987 through 2006. Though Greenspan was heralded during his time as an architect of prosperity—"Maestro," as Bob Woodward called him in an eponymous book—hindsight has been less kind. Greenspan's approach to monetary policy, specifically his targeting of low interest rates, is now seen as a key contributing factor to the housing bubble that helped lead to the current financial crisis. Greenspan himself admitted in 2008 at a congressional hearing that he had "found a flaw" in his ideology.
Then again, Cain didn't get terribly deep into monetary policy in his answer; when asked why he chose Greenspan, Cain responded, "Because that's when I served on the board of the Federal Reserve in the early 1990s," then added that he admired how Greenspan oversaw the fed and "coordinated" with the Federal Reserve banks.
Paul responded by first slamming Greenspan as a "failure" and then naming Paul Volcker as his Fed Chairman of choice. "He at least knew how to end—or help, you know, end the inflation," he said. Volcker, who served as Fed chairman from 1979 through 1987, helped to end the period of stagflation in the 1970s.
Volcker's name is muchinvoked around Washington these days: the Volcker Rule, one key provision of the Dodd-Frank act, seeks to restrict banks from making risky, speculative investments. The FDIC approved a version of the rule this week. The U.S. Chamber of Commerce has come out against the Volcker Rule, and the financial services industry is also expressing concerns.
Though Paul may be correct in noting Volcker's role in curbing inflation, it could be politically risky to express admiration for a Fed chairman who has advised Obama and helped to formulate a proposal that is much-hated in the business community.