GOP Wants To Strip Fed Of Power To Combat Joblessness
WASHINGTON -- Congressional Republicans are pushing to strip the Federal Reserve of its authority to address unemployment, leaving it with the lone responsibility of ensuring stable prices. Sen. Bob Corker (R-Tenn.), a key member of the Senate Banking Committee, became on Monday the latest Republican to propose that the central bank stop worrying itself with the jobless crisis.
"It is time that we work to clarify the mandate of the Federal Reserve," Corker said in a statement. "Providing our central bank with a clear and explicit focus on keeping inflation low will serve America better than the broader mandate approach we have today."
Congress, meanwhile, has not made a major attempt to address the unemployment crisis since passing the stimulus in early 2009, leaving the Fed as the policymaker of last resort for the jobless. An emergency extension of unemployment insurance is set to expire if Congress doesn't act shortly, prematurely costing two million people their benefits by the end of the year.
"I think the Fed should be focused on monetary policy, and clearly monetary policy has an impact on employment, but I don't think that should be a driving issue in their decision-making," Sen. Richard Burr (R-N.C.) told HuffPost when asked about Corker's suggestion.
"I've always interpreted [the Fed's mandate] to be dominated by monetary policy," Burr added, reflecting a widespread belief among both critics and defenders of the Fed that it is more concerned with battling inflation than with reducing unemployment, though the law requires it to give both equal weight.
Sen. Bernie Sanders (I-Vt.) has long been critical of the Fed for not doing enough to combat unemployment and fought against the re-confirmation of Bernanke. But, he said, stripping it of any responsibility to deal with the jobless crisis is not the answer. "Unemployment is a major crisis in this country. We need financial tools and monetary policy to deal with it as well, so I think the Fed has a role to play," he said.
The GOP's Tea Party wing contains elements that are highly critical of the Federal Reserve, but their critique of the central bank is far different than the one advanced by the strictly pro-business faction of Republican Party. That wing, of which Corker is a leading member, can find allegiance with the Tea Party in criticizing the Fed by targeting its unemployment mandate without undermining the ability of the Fed to continue to act in the interests of major banks and other large businesses. Former Alaska Governor Sarah Palin has recently joined the chorus of Fed critics.
Rep. Paul Ryan (R-Wisc.) has long been an advocate of stripping the Fed of its unemployment authority and will be the incoming House Budget Committee chairman. Rep. Mike Pence of Indiana, a national Republican leader, has similarly called to remove the Fed's responsibility over unemployment.
Senate Minority Leader Mitch McConnell (R-Ky.) did not reject Corker's suggestion when asked Monday if he agreed the Fed's role should be limited to price stability. Asked if Congress should change the Fed's mandate, McConnell said, "Yeah, that's just one of many issues we will be working with and thinking about in the coming weeks."
Federal Reserve Chairman Ben Bernanke has taken action recently aimed at lessening unemployment, reasoning that the Fed can increase the money supply without major risk of inflation, though critics question whether the action will be effective. Corker met with Bernanke Monday morning and, he said, probed the chairman about the recent Fed actions.
Arthur Delaney contributed reporting. This story has been updated to reflect additional reporting.
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First Posted: 11/16/10 12:35 PM ET Updated: 05/25/11 07:10 PM ET