The Democrats have not been coy about their spending plans should they win the White House and regain full control of the legislative branch in 2020. As Rep. Ilhan Omar (D-MN) recently tweeted, it is all about the Benjamins: $5 trillion here, $10 trillion there, and $1.5 trillion everywhere – it is raining money if the Democrats receive the keys to 1600 Pennsylvania Avenue. Remember, this is the Democratic Party with just access to tax money. Now, imagine if Sen. Kamala Harris (D-CA) or Sen. Cory Booker (D-NJ) were given 24-hours-a-day access to the Federal Reserve’s printing press. The U.S. dollar would need Marianne Williamson’s healing crystals to survive the printing blitzkrieg of the Democrats.
A Good Laffer
Art Laffer is a celebrated economist who became famous for devising the Laffer Curve, coining the term “trickle-down economics,” and betting Peter Schiff a penny that the 2008 economic collapse would not happen – it is unclear if he ever paid that cent. It is safe to say that when this recipient of the Presidential Medal of Freedom speaks, everyone listens. But his latest commentary may be more frightening than enlightening.
Laffer spoke with John Catsimatidis, an American billionaire businessman and radio talk show host, on AM 970 New York. He stated that politicians should be in control of monetary policy tools, not unelected academics at the Federal Reserve.
He told the former mayoral candidate:
“The Fed shouldn’t be independent of the administration. Never should be. None of those people were elected. They were appointed. And there’s no reason for them being appointed. It’s a policy tool that should be in the hands of the Congress and the President to make our country better.
Not in the hands of some Princeton professors who never worked a day in their lives except on an academic paper that’s far from reality. I don’t think there should be an independent Fed.”
He also encouraged Fed Chair Jerome Powell to be a “professional” and heed President Donald Trump’s advice and cut interest rates.
Throwing a Laffer Curve
Laffer should be given credit for calling out the central bank. It has way too much power for a body that was never elected by the public. Officials are chosen by the White House and never held accountable by policymakers or voters. Suffice it to say, the Eccles Building has free rein to do whatever it wants, whether that’s expanding the money supply or bailing out foreign financial institutions. With that out of the way, it would be national suicide to give Congress – Republican-controlled or Democrat-led – the latchkey to the printing press.
Even with the minimal constraints placed on the House and Senate today, politicians are spending the United States into oblivion. Despite generating trillions in tax revenue, the federal government has never balanced the budget this century, choosing to accelerate spending on welfare, warfare, and everything in between.
But while he may not exactly be advocating for Modern Monetary Theory (MMT), Laffer is indirectly advancing the cause for Rep. Alexandria Ocasio-Cortez (D-NY) and her allies. MMT essentially places the printed Federal Reserve Notes directly in the hands of the government rather than newly printed money being injected into credit markets. In addition to the Fed monetizing the debt, Congress would have immediate access to fresh cash, ready to be wasted on progressive schemes, like the Green New Deal and Medicare for All – current Keynesian monetary policy cannot even afford the Old New Deal and Medicare for Some.
To understand what donkeys and elephants controlling monetary policy would look like, take a gander at Sen. Elizabeth Warren’s (D-MA) recent proposal to devalue the U.S. dollar “on behalf of American workers.” She is demanding “more actively managing our currency value to promote exports and domestic manufacturing,” which means weakening the buck and reneging on the strong-dollar policy of the last 30 years. Warren is already a busybody as a public policymaker; imagine how she would behave with control over reserve requirements, discount rates, and term auction facilities.
Indeed, the Fed should be gradually abolished, but having politicians control interest rates is as terrifying as hearing Beto O’Rourke speak Spanish. On the one hand, the Fed already enables Washington’s reckless fiscal policy. On the other, the government could easily fund its own waste.
End Fed, Drain Swamp
Laffer asserts that the Fed should never be independent. But where is this independence everyone talks about? Sure, this is an official status, but throughout its 100-plus-year history, the central bank has colluded with the White House and taken its orders from administrations – Republican or Democrat. Once you eliminate this official designation and have freshman congressmen and statist senators dictate monetary policy, then you give the government another taxation power: the inflation tax. The last thing anyone would want is the House or Senate to compromise and agree to print whatever they want to fund guns and butter instead of practicing fiscal responsibility. End the Fed and drain the Swamp!
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