U.S. Representative Mike Pence, chairman of the House Republican Conference, said he plans to introduce a bill tomorrow that would end the Federal Reserve’s dual mandate, forcing the central bank to focus on inflation.
“The Fed’s dual mandate has failed,” Pence, of Indiana, said in a statement. The central bank is currently required by a 1977 amendment to the Federal Reserve Act to promote stable prices and full employment. Matt Lloyd, communications director for the conference, said in an e-mail that Pence intends the bill to be considered in Congress’s current lame-duck session. The session has been called to decide the fate of the Bush-era income-tax cuts.
The Fed’s Nov. 3 decision to buy $600 billion of Treasuries in a bid to reduce unemployment is being criticized by officials in China, Germany, and Brazil, as well as U.S. economists including John Taylor and Michael Boskin. Pence joined the critics today, following an open letter sent by a group of economists and former Republican government officials, asking Fed Chairman Ben S. Bernanke to halt the expansion of monetary stimulus.
Pence said the Fed’s second round of quantitative easing will monetize the U.S. government’s debt and ignite inflation. “It’s time for the Fed to be solely focused on price stability and not the recently announced QE2,” said the 51-year-old lawmaker.
House Financial Services Committee Chairman Barney Frank said today that “it would be a very dumb fight” for Republicans to press legislation to eliminate the Fed’s dual mandate.
“I do not believe the Republican Party, having campaigned in part that unemployment was too high” will now argue ‘let’s pay even less attention to unemployment,’ ” the Democrat from Massachusetts told reporters.
“The notion that the Fed should be indifferent to unemployment is a terrible idea, damaging to the economy,” Frank said.
Democrats still control both houses during the lame-duck session that began today. Republicans gained at least 60 House seats in the Nov. 2 election, enabling the party to seize a majority in the chamber in January. Republicans gained six seats in the Senate, trimming the Democrats’ control to 53-47.