The Paul Ryan House Puts A Big Down Payment On The New Republican Prosperity Agenda

Last Thursday the House of Representatives “under new management” of House Speaker Paul Ryan, gave Americans much to be thankful for before the Congressional Thanksgiving recess. The House passed, by an impressive 241-185 majority (although along mostly partisan lines), the most important monetary policy legislation in almost 40 years, theFederal Reserve Oversight, Reform, and Modernization Act of 2015 in which was included, last but by no means least, the Centennial Monetary Commission.

If you care about economic growth, this matters. Before getting to the profound significance of this legislation, let’s take a quick look at the problem, stagnation, and the cluelessness maybe now beginning to end in Washington. “Let’s clue you in.

“Secular stagnation” is a euphemism — “mysterious forces of the universe” — meant to hide feckless federal policy. According to the New York Times “Bigfoot Floyd” Norris, several years ago, Ranking the Presidents by G.D.P :

Barack Obama, 1.2% annual G.D.P. growth rate (previously 1.5%)

George W. Bush, 1.6% (previously 1.7%)
George H.W. Bush, 2.1%
Gerald Ford, 2.2%
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Dwight Eisenhower, 2.5%
Richard Nixon, 3.0%
Jimmy Carter, 3.2%
Ronald Reagan, 3.5%
Bill Clinton, 3.8%
Lyndon B. Johnson, 5.0%
John F. Kennedy, 5.4%
Reagan deserves even better, having taken a stand for killing the inflation dragon, after which economic growth exceeded 4%. Obama deserves somewhat better as well, to be fair. From 2011 to 2015 we clocked in at 1.6%, 2.3%, 2.2% and 2.4% according to the World Bank. This remains, however, well below the anemic record of Eisenhower against which JFK campaigned. It is not a record of which to be proud.

We are at least 15, and arguably 44, years into a “Little Dark Age” of economic stagnation. Note Keynes:

A Saturday Evening Post reporter asked, in 1932, John Maynard Keynes if there had ever been anything like the Great Depression. Keynes replied, “Yes. It was called the Dark Ages and it lasted 400 years.”

Now this stagnation may be about to change. If you’re tired of having gone, maybe, 5 or 10 or 15 years without a raise, keep reading.

There are many of us, both of the left and the right, who indict the Fed as torpedoing economic growth. 15 years ago, when stagnation beset the American economy, there had been no material change in tax, regulatory, spending or trade policy. The only signal change? Monetary policy. The Fed departed from its era of the “Great Moderation.”

Many Republican presidential aspirants, including Dr. Ben Carson, Donald Trump, Sens. Ted Cruz, Marco Rubio, and Rand Paul, Govs. Mike Huckabee and Chris Christie, and businesswoman Carly Fiorina are putting Fed policy into the national conversation. Now comes the Congress which, by the United States Constitution, is vested with the power “To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standards of Weights and Measure.”

It is notable that the same clause couples the regulation of the value of money with the power to fix the standards of weights and measures. Of the three axiomatic qualities of money — a medium of exchange, a store of value, and a unit of account — perhaps the most important is its property as a unit of account. As Forbes’s own editor-in-chief Steve Forbes observes, in his, with Elizabeth Ames’s, seminal classic Money: How the Destruction of the Dollar Threatens the Global Economy — and What We Can Do About It:

[Money] it is an instrument of measurement like a scale, a ruler or a clock. Instead of measuring time or weight, it measures value.

It is high time, long past time, that our officials turn their attention to how critical is monetary policy to vibrant prosperity ... and what a botch the Federal Reserve System has been, and is, making of it.

The New York Sun, along with Forbes.com a pace-setter in coverage of monetary matters, shed some dawn’s early light:

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.

Why does this legislation matter so much? Rep. Bill Huizenga (R-MI), Chairman of the House Subcommittee on Monetary Policy and Trade, with whom I briefly met last week, provided an exclusive statement for this column:

Six years have passed since the recession ended and U.S. economic opportunity remains well short of its potential. We will not fully realize robust economic growth until the Fed improves the conduct of its monetary policy. By directing the Fed to employ and communicate a more predictable and transparent rules-based approach to monetary policy, the FORM Act will improve income mobility for everyday Americans by giving them the certainty they need to save and invest for their future.

Keep a close eye on Chairman Huizenga, who occupies one of the potentially most crucial — to economic growth — subcommittee chairs in the Congress. A sea-change is occurring in the political and policy culture.

In both the presidential and the Congressional wing of the GOP, fresh and premier attention is being paid to the importance of high integrity monetary policy for economic growth and equitable prosperity. Regarding the recently House-passed legislation respecting the Fed I elsewhere (in press) have written:

The premier architects of this historic legislation are Monetary Policy Subcommittee Chairman Bill Huizenga (R-MI), Capital Markets Subcommittee Chairman Scott Garrett (R-NJ), and House Ways and Means Committee Chairman Kevin Brady (R-TX). House Financial Services Committee Chairman Jeb Hensarling (R-Tx) was instrumental in the advance of this legislation.

Impressive team. Impressive teamwork. Game changing.

Speaker Ryan and Leader McCarthy now have a deep bench of chairmen who have, between them, perhaps the greatest level of financial intelligence enjoyed in the Congress since Rep. Gramm dined alone.

Ignorant, and bad-faith, progressives keep claiming that the GOP somehow is courting austerity with its attention to monetary policy. Nothing could be further from the truth. It is beyond ironic to see figures such as polemicist Paul Krugman throw themselves on their swords in defense of Richard Nixon’s monetary regime.

The regime ushered in by Nixon correlates quite precisely with the flat-lining of median family income. That, and not “income inequality,” is the key issue besetting voters. As JFK once said, “A rising tide lifts all boats.” The tide has been going out for far too long. Why?

The Fed’s now vice chairman, Stanley Fischer (an honorable and eminent public servant, now as then), when serving as chief economist of the IMF in 1999, was interviewed by Federal Reserve Bank of Minnesota official Arthur J. Rolnick. Dr. Fischer was asked about the gold standard, one of several rule-based monetary regimes now coming to attention and renewed respect.

Dr. Fischer then stated that “It may be hubris to believe that human beings can do better than depend on the supply of gold, but we certainly should be able to do so, and are doing so now.” Very soon thereafter misguided Fed policy brought the American economy a cropper.

And, not long thereafter, another cropper. Hubris, as defined by the New Oxford American Dictionary, is “excessive pride or self-confidence.” Nemesis always follows hubris.

The Fed, backed by the White House, is pushing back, hard, on a virtuous effort by the Congress to press toward a rule-based regime and to ask whether the Fed might in fact be at least somewhat accountable for the “secular stagnation” besetting America. One hopes that the United States Senate will not be intimidated by the Fed’s pressure.

One hopes that, without impairing the invaluable independence of the Fed (which the FORM Act in no way impairs), the Senate, following the House, will execute its Constitutional power over the regulation of the value of our money. It really is high time for our elected officials to intervene to restore equitable prosperity.

The Paul Ryan House, under the Majority Leadership of Kevin McCarthy, and thanks to real statesmanship of Chairmen Hensarling, Brady, Huizenga and Garrett, among others, at long last is rising to the occasion. Congress now, by attacking what appears to be the root cause of secular stagnation — mediocre monetary policy — is pointing America back to vibrant, equitable, economic growth.

Mark November 19, 2015 on your calendar. This might just mark the beginning of a big, and welcome, transformation: the turning of the tide toward prosperity. Congress is working, with at least initial success, to put an end to a Little Dark Age long besetting the American economy. Let the Senate do its work. May a rising tide lift all boats.