Guide to Right Investments

The Left and the Right Take Aim at the Fed

It’s going to be an exciting week for Ron Paul. His presidential campaign is in the midst of a nationwide fight to pick up delegates to send to the Republican National Convention in Tampa this summer. Here in Washington, the Texas congressman will preside over hearings that take aim at the institution Paul has criticized throughout his political career: the Federal Reserve. On Tuesday, the House subcommittee on domestic monetary policy and technology, which Paul chairs, will consider various proposals to tweak, revamp, and overhaul the Fed.

The Texas libertarian has long argued that the Federal Reserve is the root of many economic evils and should be eliminated. His ideas, which for most of his career have been considered to be on the fringe, have moved into the mainstream of the GOP.

One proposal Paul will air on Tuesday, which is being introduced by Indiana Republican Mike Pence, would limit the Fed’s responsibilities to controlling inflation. Another Republican proposal, the Sound Dollar Act, would shift control of some aspects of monetary policy to the regional Federal Reserve banks and out of Washington.

Democrats and liberal groups have also attacked Federal Reserve Chairman Ben Bernanke’s policies, albeit not as scathingly as those on the right. They’ll have their day at Paul’s hearing, too. The Occupy movement protests that the Fed is held captive by the interests of major banks. Massachusetts Representative Barney Frank has a bill that would centralize even more control in Washington, moving it away from the regional banks. Representative Marcy Kaptur (D-Ohio) would curtail the influence of industry by cutting the 14-year terms of Fed governors in half and doubling the amount of time a retiring member of the Fed must wait before taking a job at a bank. Dennis Kucinich (D-Ohio) would take even more power from the Fed: He’d make it part of the Treasury Department.

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Schwarzenegger Pulling Right to Center: Margaret Carlson

May 18, 2011, 11:23 AM EDT By Margaret Carlson

(Updates fifth paragraph with preliminary election results.)

May 18 (Bloomberg) -- In one of his last significant acts as California governor, Arnold Schwarzenegger backed Proposition 14, an “open primary” initiative that California voters passed last June. California has one of the nation’s most politically polarized state legislatures and congressional delegations. The open primary has the potential to alter that.

In an open primary, all candidates compete in a single preliminary contest, with the top two vote-getters, regardless of party, going on to compete in the general election. Instead of trying to consolidate their party base, candidates have an incentive to appeal to a broader group of voters, all of whom are free to cast a primary vote. In a solidly Republican district, for example, Republicans might claim first and second place in the primary, but the more moderate of the two candidates would have an advantage by appealing to Independents and Democrats in the general election, a point that might also affect primary voters’ calculations.

The first of these jungle primary free-for-alls took place yesterday in a special election to choose a successor to U.S. Representative Jane Harman, a Democrat who retired in February from the Los Angeles seat she had held for 16 years. Democrats have an 18-point registration edge in the district, and five Democrats competed in the primary along with six Republicans, three Independents, a Libertarian and a Peace and Freedom candidate.

Crowded Field

For some candidates, standing out in such a crowded field required unusual measures. Democrat Dan Adler, who balanced an endorsement from former Fox News firebrand Glenn Beck with one from former Disney Chief Executive Officer Michael Eisner, ran ads so peculiar they went viral. (In one, filmed at a dry cleaner, Adler establishes ethnic solidarity with the store’s Korean owner on the grounds that, as a Jew, Adler is a minority -- and his wife is Asian.) A recent debate looked like open- mike night: each candidate was allotted one minute to make a case on issues ranging from terrorism to sex education.

Los Angeles Councilwoman Janice Hahn and Secretary of State Debra Bowen, both moderate Democrats, led throughout the race. In a surprise, conservative Republican businessman and Tea Party candidate Craig Huey looks to have squeaked past Bowen into the general election, scheduled for July 12. But with almost 10,000 mail-in, provisional and damaged ballots yet to be counted in a low turnout contest, the results might change.

In the general election, Hahn will be a favorite. She was born in the proverbial smoke-filled room, the daughter of Los Angeles County Supervisor Kenneth Hahn and the sister of James Hahn, a former mayor of Los Angeles. She gathered the endorsements of establishment Democrats, labor unions and the Los Angeles Times.

Republican Boon

Schwarzenegger and other moderate Republicans are hoping the new system will be a boon to the GOP, which lost all eight statewide races last year even as Republicans swept to victory across the country. To win their respective Republican primaries, gubernatorial candidate Meg Whitman and Senate candidate Carly Fiorina tacked to the right on abortion, health care, taxes and immigration. (Ronald Reagan might have serious trouble winning a Republican-only primary in the Golden State today; after all, he raised taxes.) Having moved to the right to win over conservatives, Whitman and Fiorina found they couldn’t get back to the white stripe in the middle of the road. Their opponents, Democrats Jerry Brown and Barbara Boxer, were both vulnerable. Boxer won handily by 10 points, Brown by 13.

If the open primary idea spreads, it could help put a brake on the GOP’s rightward lurch outside California as well. Many Congressional Republicans fear that if they vote to raise the debt limit, they will earn themselves a primary challenge from the right. Even U.S. House Speaker John Boehner isn’t immune to the threat.

Good With Bad

Reforms may throw out some good with the bad. For instance, party labels, especially when preceded by an adjective like “progressive” or “Tea Party,” convey a wealth of information to the casual voter. Democratic political consultant Garry South sees some potential for mischief in open primaries that do away with party identifications on the ballot. “A Democrat might try to pass himself off as having no party preference to get an advantage in a Republican-leaning district, or vice versa,” he says. “He’d be called out for that during the campaign, of course, but low-information voters may not realize that when they go into the voting booth.”

Compared with continued polarization and the collapse of the political middle, that seems a minor threat. Moderates should get another boost from California’s new bipartisan redistricting commission, which is likely to redraw district lines to soften the hyper-partisan edges that both parties have gerrymandered onto the map.

Up in Harman’s old office this week, her former chief of staff, John Hess, was overseeing the final emptying of desks, scrubbing of hard drives, and painting of walls. With Harman’s tenure over, another moderate appears bound to move into her office. This time, it won’t be a moderate Republican, as Schwarzenegger had envisioned when he backed open primaries. Next time, it just might be.

(Margaret Carlson, author of “Anyone Can Grow Up: How George Bush and I Made It to the White House” and former White House correspondent for Time magazine, is a Bloomberg News columnist. The opinions expressed are her own.)

--Editors: Francis Wilkinson, Paula Dwyer

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To contact the writer of this column: Margaret Carlson in Washington at mcarlson3@bloomberg.net

To contact the editor responsible for this column: Frank Wilkinson at fwilkinsoin1@bloomberg.net

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