WASHINGTON—The Federal Reserve's latest attempt to boost the U.S. economy is coming under fire from Republican economists and politicians, threatening to yank the central bank deeper into partisan politics.
A group of prominent Republican-leaning economists, coordinating with Republican lawmakers and political strategists, is launching a campaign this week calling on Fed Chairman Ben Bernanke to drop his plan to buy $600 billion in additional U.S. Treasury bonds.
"The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment," they say in an open letter to be published as ads this week in The Wall Street Journal and the New York Times.
The economists have been consulting Republican lawmakers, including incoming House Budget Committee Chairman Paul Ryan of Wisconsin, and began discussions with potential GOP presidential candidates over the weekend, according to a person involved.
The increasingly loud criticism of the Fed comes as some economic officials outside the U.S. are criticizing the central bank's move to effectively print money, which has the side effect of pushing down the dollar on world currency markets. President Barack Obama last week defended the Fed. The move to buy more bonds, known as quantitative easing, "was designed to grow the economy," not cheapen the dollar, he said.
The Fed, despite frequent criticism from both parties, has enjoyed considerable independence from politicians on monetary policy for the past three decades. Organizers of the new campaign predicted the Fed will increasingly find itself caught in the political crosshairs, though. A tea party-infused GOP is eager to heed voters' rejection of big-government programs, and conservatives say a new move by the Fed to essentially print more money make it ripe for scrutiny by the incoming Republican House majority and potentially an issue in Mr. Obama's 2012 re-election campaign.
"Printing money is no substitute for pro-growth fiscal policy," said Rep. Mike Pence, an Indiana Republican who has been privy to early discussions with the group of conservatives rallying opposition to the Fed plan. He said the signatories to the letter "represent a growing chorus of Americans who know that we should be seeking to stimulate our economy with tax relief, spending restraint and regulatory reform rather than masking our fundamental problems by artificially creating inflation."
The Fed faces potential pressure of a different sort from the left as well. Some prominent Democratic congressmen, including the current chairman of the House Financial Services Committee, have endorsed the quantitative-easing move.
But if the economy continues to disappoint as November 2012 approaches, the White House and Democrats in Congress may be pressing the Fed to do more to sustain the recovery as well.