The Ryan Revolution

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

We’d like to think it’s no coincidence that less than a month after Paul Ryan of Wisconsin became Speaker, the House of Representatives passed the most important monetary reform bill since Humphrey Hawkins in 1978. This happened today with the decision to send to the Senate the Fed Oversight, Reform, and Modernization Act. Mark it well that the Ryan era is about substance, and the most representative body in the American government is unhappy with the performance of the Federal Reserve and is ready for reform.

No one has any illusions about how difficult the next steps are going to be. Fiat money has a lot of friends in high places. This has become ever more evident in the years since President Nixon closed the gold window under which foreign governments could redeem their dollars in gold in the post-World War II era. Nixon himself declared for Keynesianism. Congress gave us what it calls a “dollar” with no definition in law and redeemable but with another dollar. The Left quickly discovered that this opened the way for the federal government to borrow heretofore unimaginable amounts of dollars.

In recent years, though, things have begun to appear in a galling light. Under President Obama, America has expanded the national debt more than under all previous presidents combined. Congress, which is the only branch that has the constitutional power to borrow money on the credit of the United States, certainly deserves a share of the blame for this. To its credit, though, it has been seething with resentment at the way Mr. Obama has threatened a government shutdown to protect the entitlement regime and the borrowing of ever more trillions.

That might have washed with the House had the Federal Reserve led us successfully through the crisis of 2008. But both the Fed chairman at the time, Ben Bernanke, and his successor, Janet Yellen, have confessed that they missed the signals in the data. Even so, both have set themselves athwart a reform effort. So they pursued quantitative easing, radically expanding the Fed’s balance sheet, and put through a zero interest rate policy that has led Europe, China, and even the United Nations to start talking of the need for a reserve currency other than the dollar.

Nor are we back to anything like normal on the jobs front, despite the employment mandate given to the Fed under Humphrey Hawkins (in 1978 the Times called it a “cruel hoax” on the American worker). Unemployment has come down, to 5%, but only by dint of hundreds of thousands, maybe millions of Americans getting so discouraged that they stopped looking for work or hiring people. If unemployment were really 5%, it would still be above the average unemployment rate that obtained in the two decades under the gold exchange standard of Breton Woods.

So the House has acted. The measure passed today would require the Fed to set a monetary rule of its choosing and let the Congress and the American people know what it is. It also includes Audit the Fed, which would give Congress continuing oversight into the Fed’s operations. And, importantly, it would establish the Centennial Monetary Commission, a formal body to review the various monetary regimes the Fed has pursued and make recommendations for reform as it begins, as it does this year, the second century of its operations. The Sun has endorsed this trifecta in all its parts.

No one underestiates the difficulty of getting this law passed in the Senate — or past a president who needs fiat money to fund the expansion of government. But the progress of these issues to this point would have been hard to imagine but a year or two ago. We will hear all sorts of warnings that Congress should stay out of monetary matters. The thing to remember is that it was precisely to the Congress that the monetary powers of the United States government were granted in the Constitution. It is wonderful to have at the head of the House a Speaker prepared to take the lead.


The New York Sun

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