Published at, January 5th, 2011

By Tony Fratto

Federal Reserve Chairman Ben Bernanke will make his first visit to the 112th Congress on Friday for what has recently become a ritualistic beating in the guise of a hearing on monetary policy.

Aside from President Obama, no single federal official has been the recipient of more bipartisan slings and arrows than Ben Bernanke. The President, despite the historic shellacking his party received in the November mid-term elections, enjoyed a lame-duck session of Congress where he achieved many of his policy goals. A commensurate burst of pundit cuddling ensued, earning him the latest “Come-back Kid” moniker.

Howls of approbation are still ringing in the halls of Congress, among conservative economists, and even within the Fed boardroom itself regarding the Fed Chairman’s decision to renew quantitative easing (QE2). Further, some of the Chairman’s harshest critics will soon take leadership positions in Congress, giving them a perch to attack Fed policy, even if they fall short of actually altering Fed policy. So Bernanke would appear to be an unlikely nominee for the next Come-back Kid, but there’s a likely scenario that could earn him the award.

Most Americans and even many economic policy watchers have very few yardsticks to measure success. The numbers that matter most are (1) the green or red arrows at the bottom of the TV screen reporting on day’s stock market close; (2) the usual measurements of job creation – monthly job growth and the unemployment rate; and (3) inflation. Start talking about manufacturing capacity utilization, inventories, or the Fed’s balance sheet,, and eyes glaze over.

Equity markets have recovered strongly since the recession ended and opened 2011 with strong increases and robust predictions for further gains throughout the year. If predictions of a Dow Jones Industrial Average eclipsing 13,000 materialize,confidence and “good feelings” about the economy will also materialize. Moreover, Americans with 401k plans are starting to feel better about their balances after getting slammed during the financial crisis. Barring external shocks, projected US GDP growth in the 3.5-4% range for 2011 makes a 13000+ Dow likely. Critics of Bernanke will say the Fed inflated an equity bubble, but for most Americans it will be seen as evidence of success foreshadowing a better economic future.

On Friday we’ll get our latest grade on monthly job creation. All indicators point to sustained monthly job creation in 2011 – not in the higher ranges we’d like to see (400,000+/month), but regular prints north of 200,000 jobs/month. Bernanke was sharply criticized for citing the Fed’s employment mandate when he announced QE2, but monthly job creation sustained in that range would take the edge off of criticism. The unemployment rate will remain stubbornly high for a long time, but a fair narrative of progress on the jobs front could be made.

Inflation is a trickier issue, and represents the mostsignificant political concern for Chairman Bernanke.

With low capacity utilization and no wage pressure (owing to elevated unemployment) core inflation will certainly remain low for the foreseeable future.

But many are predicting volatile food and energy prices are expected to spike in 2011, with some forecasting gasoline to peak over $4/gallon. Gas prices serve as the most frequently-viewed economic data point by most Americans. Even in the absence of real general inflation in the U.S., these are prices felt by American households and often cited by Fed critics as evidence of inflation and dollar devaluation. Bernanke will come under withering criticism if these spikes materialize, but if they fall short of the more dire predictions, so too will criticism of Bernanke.

We’ll have a pretty good sense of Bernanke’s grades by summer. If he scores well on those three scorecards, Ben Bernanke will be your next Come-back Kid.

Tony Fratto is a Managing Partner at Hamilton Place Strategies, former Assistant Secretary at the U.S. Treasury Department, and a former Whit House official. He is also an on-air contributor for CNBC.