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The Federal Reserve should be focused on maintaining sound monetary policy and not get distracted by trying to bring down stubbornly high unemployment rates, according to U.S. Rep. Marlin Stutzman, R-Ind.
Stutzman is a member of the House Budget Committee and is sponsor of the FFOCUS (Focusing the Fed on the Currency of the United States) Act.
Achieving and continuing strong monetary policy has been the task of the Federal Reserve from its inception, but in the late 1970s President Carter and Congress expanded that role to include the pursuit of policies that promote full employment in the U.S.
Stutzman told WND that dual mandate is a problem because what's best for spurring job creation is not always best for our monetary policy. The FFOCUS Act would end the Fed's responsibilities on boosting employment and make its sole priority the maintenance of robust monetary policy.
"When you start taking into account the unemployment rate, you start trying to manipulate the monetary policies and the monetary system to try to drive unemployment rates down," said Stutzman. "I believe they need to take that out of their responsibilities, cut it out of their formula and focus just on the economy's need for strong, sound fiscal policy rather than trying to also appease the other side."
"The bill that we're filing will just simply say that the Federal Reserve Bank does not need to take into account unemployment rates anymore when they are setting monetary policy but focusing strictly on what the economy needs," he said.
Stutzman said a classic example of the Fed pursuing policies that put its stated missions at odds are record-low interest rates. He said those can be seen as a good thing in the short term, but they're a bad thing in the long term as long as we fail to see much economic growth. He explained that there would be far less "quantitative easing" under his legislation as well.
"Their position is that if we can inject more cash into the system then people will have the capital that they need to expand businesses, to start businesses and we'll see economic growth," said Stutzman. "But on the flip side, we have the Dodd-Frank legislation which is really holding and forcing banks and financial institutions to make decisions that they normally wouldn't make."
He said the easing policies are actually placing our fiscal standing on shakier ground.
"There may be a symptom here that they're trying to fix, but I think in the long run it's not dealing with real underlying problems and that is national debt. My fear is inflation because of more dollars into the system that aren't really being supported by economic growth behind it," said Stutzman.
The congressman is also a strong supporter of House legislation calling for a full audit of the Federal Reserve.
"With the Fed being a quasi-government agency but managing tax dollars, it's important for every taxpayer, for members of Congress, for the president to know exactly what our money's being used for, where it's being invested and why," he said.