Increasing political encroachment on the Federal Reserve, particularly from the Republican Party, could threaten the central bank’s hard-won independence and undermine confidence in the nearly 100-year old institution.
That was the pervasive sentiment among economists gathered at the Fed’s annual monetary policy symposium in Jackson Hole, Wyoming. Against the dramatic backdrop of the Grand Teton mountain, many said a closely-contested presidential race has turned the monetary authority into a political football…
The primary topic of conversation at the rustic mountainside resort was whether or not Fed Chairman Ben Bernanke and his colleagues would deliver another round of monetary stimulus soon.
But, when probed on the issue on the sidelines of the meeting, many participants voiced concern about the heated political rhetoric aimed at the Fed, including a bill that would audit the conduct of monetary policy that is gaining increasing traction among Republicans.
The Fed is already subject to regular audits, but congressman Ron Paul’s bill would remove an exemption for monetary policy deliberations.
Ironically, the complete political gridlock that characterizes U.S. fiscal policy has left the Fed in the difficult position of being “the only game in town.”
Both the Fed and the independent Congressional Budget Office have said a looming “fiscal cliff” of spending cuts and expiring tax breaks at the end of this year could shove a fragile economy into a new recession.
Given the track record of Congress as a whole – and Congressional Republicans as leading incompetents – can you imagine the disaster of having a central bank beholden to the political clown show? Our nation’s credit rating would be lower than Bangladesh.
The worst of it would be losing the so-called dual mandate in place since 1977. Republicans couldn’t care less about the lot of American unemployed and the first thing they’d remove would be that portion of the mandate. And, of course, like journalists and politicians alike, they don’t know there actually is a triple mandate. Basic monetary policy and balanced employment is joined with moderating interest rates throughout our economy.
Cripes! Congress has an approval rating of 16%. Congressional Republicans are even lower. Would you hire someone like that to run a bank?