What do Barack Obama, [mc_name name=’Sen. Harry Reid (D-NV)’ chamber=’senate’ mcid=’R000146′ ], [mc_name name=’Sen. Elizabeth Warren (D-MA)’ chamber=’senate’ mcid=’W000817′ ] and Paul Krugman have in common? They all vehemently oppose the “Audit the Fed” bill introduced by [mc_name name=’Sen. Rand Paul (R-KY)’ chamber=’senate’ mcid=’P000603′ ] last month. That alone should be enough to make any Republican give the bill a fair reading.
Co-sponsored by other Republican Presidential hopefuls [mc_name name=’Sen. Marco Rubio (R-FL)’ chamber=’senate’ mcid=’R000595′ ] and [mc_name name=’Sen. Ted Cruz (R-TX)’ chamber=’senate’ mcid=’C001098′ ], Audit the Fed should not be viewed as a salvo in the Republican nomination contest, but as an opportunity for all Republicans to come together to bring accountability to an immensely powerful government institution. Much of the debate over this issue has focused on the pragmatic question of the Fed’s competence. While one could write an entire monograph about the Feds failings from Great Depression through the financial crisis, there is a more fundamental question at issue. Is it is a good thing in a democratic society to put one of the most powerful functions of government beyond any possibility of review by the governed?
Control over the money supply is a power granted exclusively to Congress by the United States Constitution. This is as it should be since monetary policy is perhaps the single most powerful function of any government. Virtually every economic transaction is facilitated by an exchange of money and, accordingly, the ability to control the money supply and the interest at which money is available to be borrowed is the power to bolster or destroy savings, affirm or repudiate debts, and stimulate or destroy economic growth. Indeed even national defense, which is perhaps the only other government power of comparative significance, cannot be accomplished without a stable money supply to facilitate purchase of weapons and payment of troops. It is no accident that the core money power of government was placed in the most democratic branch of the U.S. government where it would be appropriately subject to scrutiny and public debate.
Defenders of the Fed, such as Dallas Federal Reserve President Richard Fisher, warn ominously that auditing the fed would—horror of horrors—subject it to the influence of politicians. The Fed can function, we’re told, only if it is “independent.” Independent of what is never expressly stated because of course it means independence from the people and the democratic process. It means independence for a small cabal of appointed elites from having to explain, justify, or have their decisions and reasoning reviewed by ordinary, intellectually inferior voters. This is a truly remarkable position to take in a country founded on the belief that the legitimacy of government derives from the consent of the governed.
The absurdity of the Fed’s position can be illustrated by applying it to virtually any other area of government. Let’s imagine that rather than having a Secretary of Defense reporting regularly to the President, dismissible at will, and subject to extensive Congressional oversight, we created an independent board of National Defense Commissioners with the exclusive authority to direct the military and determine where and when to employ force throughout the world. Such a board, consisting of defense experts, might plausibly argue that their field is too specialized and complicated to leave to the incompetent hands of the people and their elected representatives. Thus, following the same reasoning as the Fed, they could argue that they should not be subject to having their policy decisions reviewed by the people since, in doing, the people might get confused and push them into making bad decisions. It sounds absurd, I know, because it is absurd. An institution exercising important government powers should not be “independent” from democratic accountability.
[mc_name name=’Sen. Rand Paul (R-KY)’ chamber=’senate’ mcid=’P000603′ ]’s “Audit the Fed” bill simply removes certain limitations on the power of the Comptroller General to audit the Fed’s activities and report to Congress, most notably the veil of secrecy cloaking the Fed’s “deliberations, decisions, or actions on monetary policy matters. . .” 31 U.S.C. § 714(b)(2). In other words it puts the Fed in the same position as virtually all other federal and state governmental entities, which do not enjoy secrecy in their deliberations and decisions. Even the ability of agencies involved in national security to treat certain information as classified is not the blanket immunity from scrutiny the Fed enjoys, and the Senate Intelligence Committee (among other democratic institutions) has the ability to access such documents. “Audit the Fed” is a sensible democratic measure that every Republican, and indeed every American that believes in representative government, should support. Let’s shine some light on the Federal Reserve and let the American people come to their own conclusions about what that light reveals.