WASHINGTON, D.C. — Audit the Fed, a cause championed by former U.S. Representative Ron Paul (R-Texas), was picked up by Paul’s son, U.S. Senator Rand Paul (R-Ky.), early on in his political career.
For some voters, including more libertarian-minded voters, auditing the central bank is as important of an issue as raising the minimum wage is for progressives. Now that Sen. Paul has entered the 2016 presidential election, the issue may get a little more attention.
The goal behind auditing the Fed is to increase transparency in the U.S. central bank. According to Rand Paul’s campaign website, in the “Audit the Fed” section under “Issues”:
“The Federal Reserve was created by Congress and is supposed to be overseen by Congress. The Fed is now in every nook and cranny of banking with unprecedented regulatory powers and no Congressional oversight. I believe the Fed should be audited and the regulatory power should be placed back under the control of Congress.”
The Federal Reserve, created by Congress in 1913, is the “independent” central bank of the United States. This means it is supposed to operate outside the political scrutiny of the executive and legislative branches, and is charged with providing “the nation with a safer, more flexible, and more stable monetary and financial system.”
Fed Chair Janet Yellen and other officials within the central bank have argued that a full audit (the Fed already must comply with a partial audit) and greater oversight over the Federal Reserve from Congress would compromise the independence of the agency, and would subject the Fed’s monetary policy to the politics of the Legislative Branch.
Rand Paul Doesn’t Actually Want to Audit the Federal Reserve
However, when so many other issues are politicized, such as Obama reopening relations with Cuba or the Iran nuclear deal, can the Fed get by without political scrutiny in its job of preserving the economy?
The EPA and Social Security Administration are two other prominent agencies that were created by Congress to oversee policies that go beyond the “scope of ordinary legislation.”
Any government agency that claims to be independent is not truly independent because it owes its very existence to Congress. The president also nominates the C-level administrators for these groups and the Senate goes through the motions of approval.
By politicizing these issues, it would allow politicians, regardless of party affiliation, a greater say in every miniscule policy — such as monetary policy.
Perhaps the economist James Galbraith said it best: “That independence [of the Federal Reserve] is of course independence from the executive branch.”
It is Congress’ responsibility to hold the central bank accountable for its decisions and the impact they have on the economy. There can only be unilateral action until Congress calls a hearing, an investigation, or even an audit. Independence from the Legislative Branch, in this case, is a myth.