Economist Scott Sumner at The Money Illusion is exactly right when asserts that what we should be debating re: Bernanke’s reappointment as Fed Chairman is monetary policy. To be precise, Sumner writes that the key economic issues are:
1. Whether to cut the fed funds target from 0.25% to 0%
2. Whether to put an interest penalty on excess reserves
3. Whether to do additional QE
4. Whether to set an inflation or NGDP target
5. Whether to target growth rates or levels
6. And of course the key overarching question: Would the economy benefit from an increase in AD, or nominal spending?

Yes, there are political considerations, as Sumner recognizes. It’s Washington, after all. Nonetheless, it’s striking how little attention is being given to the issue of monetary policy proper and the role it played, or didn’t play, in the provoking if not causing the Great Recession. The usual suspects in economic commentary would have you believe that other issues take priority, but there are some weighty policy questions lurking, and a fair amount of it rests with decisions made (and not made) in the halls of central banking in recent years.
As we said earlier this month, “The question is less about blame and more of figuring out how to improve monetary policy going forward. Indeed, the stakes are higher than ever for the years ahead.”
Indeed, there are other perspectives, such as the Austrian view. But unless you’re looking hard and digging deep, you might think that the only stakes in new new debate over Bernanke’s nomination are political. In fact, there’s quite a bit more hanging in the balance than whether the President scores points in the next news cycle.