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Nearly 600 economists sign letter, defend independence of the Federal Reserve

delichon 1y ago
That would be independence from accountability to voters. Should congress be able to spin off any number institutions insulated from democracy? Isn't SCOTUS enough?
- mitchbob 1y ago
  The Fed was created by an act of Congress, our elected officials. Some background: https://www.stlouisfed.org/in-plain-english/independence-and-accountability https://www.stlouisfed.org/in-plain-english/independence-and... https://www.brookings.edu/articles/why-is-the-federal-reserve-independent-and-what-does-that-mean-in-practice/ https://www.brookings.edu/articles/why-is-the-federal-reserv...
- jljljl 1y ago
  Fed governors are subject to democratic accountability (nomination by the president and confirmation by the Senate), but their term is 14 years instead of 4. The Chairman is subject to the same accountability, but on a 4 year term. There are good reasons why the board of governors is designed to turn over slowly -- it keeps the board focused on long term performance of monetary policy instead of focusing on the next election.
  - delichon 1y ago
    > it keeps the board focused on long term performance of monetary policy instead of focusing on the next election. The neutral dispassionate bureaucrat is a unicorn. One might exist but I won't bet on Diogenes ever finding them. It would be a strange alchemy for political appointees to transmutate into unbiased technicians. As with SCOTUS, a longer term is mostly a longer period to apply partisan values.
    - jljljl 1y ago
      You probably can't eliminate any sort of political bias, but a single 14 year term puts you pretty much outside of any electoral cycle considerations, which is important for maintaining long term stability in monetary. Making them have to stand for election or make the president happy every 4 years would completely eliminate any ability for the board to focus on the actual technical issues. There's a reason why countries that eliminate CRB independence tend to see hyper inflation It also isn't a lifetime appointment, and tenures are staggered so the board isn't fixed in place for generation like the Supreme Court
    - deeg 1y ago
      I hear where you're coming from but an independent Fed has worked pretty well since it was started. Mistakes have been made, of course, but afaik they were based on bad economics, not politics. Making the Fed more political, especially now, seems like a bad idea.
- nerpderp82 1y ago
  Maybe the Fed should run tariffs as well, at least something with a wavelength longer than 6 weeks.
  - delichon 1y ago
    I blame Congress. It was an abdication of their direct Article I responsibilities to create the ambiguity of "emergency economic powers" in IEEPA in 1977. It is an abdication now to fail to repeal it. Trump is the teenager proving that you shouldn't leave your car keys in the ignition. SCOTUS abdicated its responsibility to shut down Congress's move to divest its power to tax. POTUS is trying to leverage powers that should never have been granted to attempt to apply the biggest tax increase in human history.
    - nerpderp82 1y ago
      Abdicating your responsibility should require a constitutional amendment. All these laws where congress hands over power to someone else are unconstitutional and should be voided.

That would be independence from accountability to voters. Should congress be able to spin off any number institutions insulated from democracy? Isn't SCOTUS enough?

mitchbob 1y ago
The Fed was created by an act of Congress, our elected officials. Some background: https://www.stlouisfed.org/in-plain-english/independence-and-accountability https://www.stlouisfed.org/in-plain-english/independence-and... https://www.brookings.edu/articles/why-is-the-federal-reserve-independent-and-what-does-that-mean-in-practice/ https://www.brookings.edu/articles/why-is-the-federal-reserv...
jljljl 1y ago
Fed governors are subject to democratic accountability (nomination by the president and confirmation by the Senate), but their term is 14 years instead of 4. The Chairman is subject to the same accountability, but on a 4 year term. There are good reasons why the board of governors is designed to turn over slowly -- it keeps the board focused on long term performance of monetary policy instead of focusing on the next election.
- delichon 1y ago
  > it keeps the board focused on long term performance of monetary policy instead of focusing on the next election. The neutral dispassionate bureaucrat is a unicorn. One might exist but I won't bet on Diogenes ever finding them. It would be a strange alchemy for political appointees to transmutate into unbiased technicians. As with SCOTUS, a longer term is mostly a longer period to apply partisan values.
  - jljljl 1y ago
    You probably can't eliminate any sort of political bias, but a single 14 year term puts you pretty much outside of any electoral cycle considerations, which is important for maintaining long term stability in monetary. Making them have to stand for election or make the president happy every 4 years would completely eliminate any ability for the board to focus on the actual technical issues. There's a reason why countries that eliminate CRB independence tend to see hyper inflation It also isn't a lifetime appointment, and tenures are staggered so the board isn't fixed in place for generation like the Supreme Court
  - deeg 1y ago
    I hear where you're coming from but an independent Fed has worked pretty well since it was started. Mistakes have been made, of course, but afaik they were based on bad economics, not politics. Making the Fed more political, especially now, seems like a bad idea.
nerpderp82 1y ago
Maybe the Fed should run tariffs as well, at least something with a wavelength longer than 6 weeks.
- delichon 1y ago
  I blame Congress. It was an abdication of their direct Article I responsibilities to create the ambiguity of "emergency economic powers" in IEEPA in 1977. It is an abdication now to fail to repeal it. Trump is the teenager proving that you shouldn't leave your car keys in the ignition. SCOTUS abdicated its responsibility to shut down Congress's move to divest its power to tax. POTUS is trying to leverage powers that should never have been granted to attempt to apply the biggest tax increase in human history.
  - nerpderp82 1y ago
    Abdicating your responsibility should require a constitutional amendment. All these laws where congress hands over power to someone else are unconstitutional and should be voided.