This article on Bloomberg.com has got to be one of the most heartbreaking articles I’ve read over the years. It’s about political lamentation over the expected reduction over time of the Fed’s remittance to the Treasury of profit it makes on its holding as interest rates rise, and frustration in their attempts to spur a Fed taper to retain as much of the remittance as possible. Just to note, however, John Campbell, Chairman of the Subcommittee on Monetary Policy in the House is the only politician mentioned to have gone on record with his concern.

First, the object of QE is for the Fed to get on toward complying with the dual mandate, and in that case, the long run outlook is for interest rates to rise due to increased economic activity.

So the basic gist of the article is that money the government receives from the Fed and an ultra-low interest rate environment from a depressed economy is what Mr. Campbell wants to keep. He would rather have persistently high unemployment, the lowest labor force participation rate in three decades with very little potential for growth so the government can keep the $85 billion per year.

I cannot believe this guy is so stupid. But these it is, for all to see, how little he (and likely other colleagues) values the quality of life in the United States where $85 billion per year can buy permanent economic depression. Why not? Average Joe won’t ever miss what he’ll never have, like a booming job market.

And just to go into a few of the elements of extreme stupidity in this plan, the other things being forgone are:

Exchanging Fed Remittance for increased tax revenue from putting people back to work

The spending on social programs will continue to explode, Social Security and Medicare – especially Social Security as people give up looking for jobs that aren’t there and get certified as disabled- because tax revenue that funds these programs is depressed. The sum of deficit in these programs over the next decade or so is likely dwarfs the $85 billion Fed remittance.

Taper will cause a rise in short term rates in the short run making the problem worse, not better.

This article is so heartbreaking, I think Mr. Campbell ought to back to his constituents and tell them that he wants to keep a depressed economy so that the debt problem will continue to be a problem, and that the Fed remittance is more important than a bright future economic for their kids.

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