Congress has been passing the buck on the value of money since it created the Federal Reserve System in 1913. Article I, Section 8 of the U.S. Constitution not only provides the Congress the authority to borrow money on the credit of the United States, but to coin money and regulate both its domestic and foreign value. Today, the two agencies to whom primary responsibility for regulating the value of money has been passed down to are the U.S. Treasury and the Board of Governors of the Federal Reserve. President Joe Biden appeared to emphasize the “buck passing” by meeting recently with Jerome Powell, chairman of the Board of Governors. Reportedly, Mr Biden reiterated the Federal Reserve’s political independence and that the White House would not only do its part in combating inflation, but “get the Fed to do whatever it takes.”
Between U.S. Treasury Secretary Janet Yellen taking the hit for making the wrong call last year on the transitory nature of inflation, thinking that inflation would abate a lot sooner, and what some analysts deem as poor decision making on the part of Chairman Powell for not raising rates faster, Americans are seeing the political nature of the inflation narrative.
Mr Biden is distancing himself from the inflation narrative, a politically prudent move, since Congress long abdicated its role on the matter. But it is a move that is both too late and tentative. Forget that Mr Biden selected as Treasury secretary a former chairman of the Board of Governors and that Mr Biden nominated Chairman Powell to another four-year term. Mr Biden decided to keep the inflation arrows in his quiver probably unaware of the restraints his Executive Branch is under in terms of policymaking.
By coming out swinging on the one hand that he will be laser focused on inflation, but on the other hand is ready to throw his Treasury secretary under the bus for a bad inflation call while telling the world that inflation management is really all on the Fed makes Mr Biden look weak.
Closer to home, the Georgia representatives to Congress seemingly prefer tout Mr Biden’s increasingly waning line on supply chain constraints. For example, U.S. Representative Nikema Williams, a Democrat representing Georgia’s 5th district, and U.S. Representative David Scott, another Democrat representing Georgia’s 13th district, have emphasized Mr Biden’s infrastructure and Build Back Better plan as a way to expand economic capacity, relieve congestion, increase jobs, and stimulate the economy.
Sitting on the other side of the inflation argument is U.S. Representative Barry Loudermilk, Republican of Georgia’s 11th district. Inflation, according to Mr Loudermilk, is a monetary phenomenon. One need only look at increasing asset prices, according to Mr Loudermilk, to see that inflation is a monetary issue.
Sitting somewhat in the middle is U.S. Senator Jon Ossoff. While he agrees with the President that unraveling the supply chain is one way to combat inflation, he took issue with the Federal Reserve’s pursuit of massive quantitative easing when it was clear that inflation was not transitory.
The narrative has been disingenuous on the part of Mr Biden and on the part of Georgia Democrats. Their lane is a political lane and over 100 years ago, Congress decided that the money vehicle would not be driven in the political lane. Saying that they can do something about inflation while acknowledging the money supply is the responsibility of the Federal Reserve only confuses voters.
6 June 2022
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