Pence Bill Would Strip Fed of "Maximum Employment" MandateNovember 18, 2010 - by Donny Shaw
Since 1977, the Federal Reserve has operated on a dual mandate — promoting maximum employment and protecting price stability. Some Republicans in Congress are moving to strip the Fed of its unemployment mandate and leave them single-mindedly focused on stopping inflation.
On Tuesday, Republican Conference Chairman Rep. Mike Pence [R, IN-6] introduced H.R. 6406, a bill “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.” Sen. Bob Corker [R, TN], an influential member of the Senate Banking Committee, quickly backed the idea.
“I think we ought to get the Fed back in the business of focusing on price stability and preventing inflation and not also on this dual mandate of full employment for the country,” Pence said in an interview recently with CNBC. “It’s creating confusion here. Printing money is no substitute for sound fiscal policy.”
On the House floor Pence said he believes that “full employment must be the objective of policymakers in Washington, D.C.,” but he think it should be Congress’ job, not the Fed’s. While the Fed certainly hasn’t been very successful with their unemployment mandate recently, it’s important to note that Congress has done poorly on the job creation front as well. They have struggled to keep up with the bare minimum — keeping unemployment insurance extended while the unemployment rate is high — let alone attempt any serious legislation to create jobs or otherwise help the unemployed become employed. Right now, both Congress and the Fed are supposed to be trying to fix the jobs crisis, but neither are because both lack the independence to work on the behalf of those who have no money and little influence.