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Pence Bill Would Strip Fed of "Maximum Employment" Mandate

November 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.

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Comments

LucasFoxx 11/19/2010 9:29am
in reply to Mahlalie Nov 19, 2010 6:23am

“pays people to not work” tell that to the middle class families trying to find work from the people at the top, who have enjoyed the Bush Tax credits these last few years and, who have not been using their extra cash to hire.

LucasFoxx 11/19/2010 9:34am
in reply to LucasFoxx Nov 19, 2010 9:32am

As “ususal”, I wish we could correct our posts here.

Catalyst22 12/02/2010 4:26pm
in reply to Mahlalie Nov 19, 2010 2:29pm

Almost all people in America have fond memories of growing up with their families working hard to support them… this is just as true for the child of a minimum-wage custodian as it is for the child of a ‘tortured’ small business owner. The argument that people are unemployed because they are fiscally irresponsible or lazy is baseless, and it always has been.

The point of unemployment insurance has NEVER been to create jobs; its purpose is to lessen temporary economic shocks to laid off workers, their families, and the economy as a whole. There are currently over 5 people seeking work in this country for every open job- what would your ‘legit economics class’ say about what happens to the weak economy if the other 80% of the people on unemployment simply drop out of the economy and stop spending altogether?

deborahg6 11/18/2010 7:22pm

Way. To. Go. Pence!

Mahlalie 11/19/2010 6:23am

Extending unemployment does not create jobs. It encourages fiscal irresponsibility and pays people to not work.

craines 11/19/2010 4:49am

Let’s see if I can understand this one. The republicans block EVERY SINGLE Bill that the democrats put forward to create jobs. It worked! The republican will control the house.

So the only option left is to buy billions of dollars worth of treasury’s to try and instill confidence in the market so banks will start lending again and employers hiring.

What options do they have left if they can not legislate because they can not get any bills through to help small business.

They will jump start this economy one way or the other. They would not had to do this if there legislation had gone forward and started creating jobs.
It probably wont work anyway.

Here’s a great article on the Fed QEII

http://moneymorning.com/2010/11/19/federal-reserves-quantitative-easing-strategy-save-the-us-economy/

CR

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rapope 03/01/2011 2:41pm

When are we going to wake up and audit the Fed? [I’d love to see who is jailed after an audit!] Nationalize the Fed and many problems will disappear…

LucasFoxx 11/19/2010 9:32am
in reply to ryandsmith Nov 19, 2010 6:23am

What ever happened to lowering taxes so the poor can keep more of their money? It’s getting the middle finger from the ususal Republican suspects on the floor of the House.

VahidThaneEichenauer 11/24/2010 3:09pm
in reply to deborahg6 Nov 18, 2010 7:22pm

I don’t think Bernanke and the rest of the Board of Governors would operate any differently pre or post HR 6406. If Congress isn’t allowed to fully audit the Federal Reserve it doesn’t know what the fed has done in the past and is unlikely to have any oversight influence in the future.

HR 1207, S 604 – Audit the Fed.

Mahlalie 11/19/2010 2:29pm
in reply to LucasFoxx Nov 19, 2010 9:29am

I AM from a middle class family. I grew up with my dad working his butt off. Not only that, he doesn’t have to work for “the people at the top.” He works for himself which is much harder. Businesses don’t hire people because they have spare money; they hire people because it is cost effective. If tax rates are too high or the revenue stream isn’t there, they are not going to hire new people. Take a legit economics class some time.

beenblue 11/24/2010 7:00pm

Economics ( also known as the “dismal science”) traditionally holds that growth is good, but too much growth is not good. Job growth is good, but too much job growth is not. In 1978 the Full Employment and Balanced Growth Act instructed the Fed to seek stable prices to fight inflation and maximize sustainable growth for the economy, while also seeking to maximize employment. Until the economic boom of the mid-1990s, economic orthodoxy said that the unemployment rate could not fall below 6 percent without provoking dangerous levels of inflation. In the classic economic textbook view, a certain amount of unemployment is necessary, even desirable, because it limits rising labor costs. Well Elvis has left the building, so what is “sustainable” growth, and what`s " maximum" employment ? That`s a question the republicans seem to dodge on capital hill. And so that I`me not misunderstood the president could always invoke executive privilege, instead of blaming congress, it`s an old trick.

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ryandsmith 11/19/2010 6:23am
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One less thing the Fed Reserve can get their dirty little banker hands on is a good thing indeed. Yet, what ever happened to lowering taxes so the poor can keep more of their money?

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