Audit the Fed?
Apparently, some are pushing for including Ron Paul’s “audit the Fed” measure in the Republican platform; Bloomberg has the story here.
According to Ron Paul, “It’s good economics and it’s good legislation, but it’s also good politics, because 80 percent of the American people agree with it.” It may be good politics, but it is not good economics. Congress has lower public approval ratings than just about any institution in the country, and we want to give them the ability to influence monetary policy?
Paul’s bill, which passed the House in July, would even allow the GAO to audit “deliberations, decisions, or actions on monetary policy matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, and open market operations.” And we believe that this will have no ill effects on the Fed’s deliberations or decisions?
Let’s hope Romney listens to his economic adviser, Glenn Hubbard, who opposes the idea.
So does Laurence Meyer:
The motivation for granting independence to central banks is to insulate the conduct of monetary policy from political interference, especially interference motivated by the pressures of elections to deliver short-term gains irrespective of longer-term costs. The intent of this insulation is not to free the central bank to pursue whatever policy it prefers–indeed every country specifies the goals of policy to some degree–but to provide a credible commitment of the government, through its central bank, to achieve those goals, especially price stability.
No big surprise that Bernanke is opposed to Paul’s legislation, but here are his comments: