Monday, November 16, 2020
Politicians from across the ideological spectrum ought to rein in the Fed and seek greater transparency of its deliberations, methodologies, and decision-making processes. After all, the Fed is presently structured as an independent agency and receives its operational funding outside the constraints of the normal congressional appropriation process. Furthermore, the Fed’s inherent structure—wherein a purportedly enlightened coterie of bankers sets rates for the entire economy—necessarily values central planning over letting market forces determine proper interest rates.
At minimum, our lawmakers can seek to audit the Fed’s internal workings and to legislatively modify its traditional dual mandate of price stability and maximum employment to a less hubristic, more modest single mandate of mere price stability. The pursuit of maximum employment has pushed rates down and punished savers; it’s an outdated goal that has only led to more booms and busts.
If we seek to earnestly push back against rising income inequality in America, constraining our central bank would be a natural place to start.