Mike Pence (R-IN) last week introduced a bill currently titled, “To amend the Federal Reserve Act to remove the mandate on the Board of Governors of the Federal Reserve System and the Federal Open Market Committee to focus on maximum employment,” which “Amends the Federal Reserve Act to repeal the joint mandate on the Board of Governors of the Federal Reserve System and the Federal Open Market Committee to make maximum employment one of the goals of their duty to maintain long run growth of the monetary and credit aggregates commensurate with the U.S. economy’s long run potential to increase production.
Let me boil that down a little bit. It removes a goal of the Fed to make policy that is designed to create “maximum employment.”
Why?
I’m not a lawyer, finance guy, or anything like that, so I leave it up to you. But you have to ask, if the GOP’s promise is “jobs, jobs, jobs!” why are they creating legislation that would actually take away a goal of “maximum employment?”
Here’s what I found, a report by Marc Labonte, “Specialist in Macroeconomic Policy.”
“The Federal Reserve’s (Fed’s) current statutory mandate calls for it to “promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.†Some economists have argued that the current mandate should be replaced with a single mandate of price stability. Often the proposal for a single mandate is paired with a more specific proposal that the Fed should adopt an inflation target. Under an inflation target, the goal of monetary policy would be to achieve an explicit, numerical target or range for some measure of price inflation. Inflation targets could be required by Congress or voluntarily adopted by the Fed as a way to pursue price stability, or a single mandate could be adopted without an inflation target. Alternatively, an inflation target could be adopted under the current mandate.”
“Arguments made in favor of a price stability mandate are that it would better ensure that inflation was low and stable; increase predictability of monetary policy for financial markets; narrow the potential to pursue monetary policies with short-term political benefits but long-term costs; remove statutory goals that the Fed has no control over in the long run; limit policy discretion; and increase transparency, oversight, accountability, and credibility. Defenders of the current mandate argue that the Fed has already delivered low and stable inflation for the past two decades, unemployment is a valid statutory goal since it is influenced by monetary policy in the short run, and discretion is desirable to respond to unforeseen economic shocks. A case could also be made that changing the mandate alone would not significantly alter policymaking, because Fed discretion, transparency, oversight, and credibility are mostly influenced by other factors, such as the Fed’s political independence.”
You be the judge.
Just seems to me, anything we can do to bring down a 10% unemployment rate should be job #1.