The myth of American free-market health care

by Mike Miller

The blue screen revealed the next answer: “A quasi-government organization that has the power to print money out of thin air with little direct oversight.” Uh… What is the Federal Reserve? That’s correct! A 2002 Jeopardy game show champion, blogger, and Reuters Money and Politics columnist has published a column denouncing Ron Paul’s HR.1207 and his effort to bring more transparency to the Federal Reserve.

James Pethokoukis writes:

An audit would create an explicit and clear congressional assessment of the Fed’s performance.

I’m with you here, compared to what we have now which is an unclear generalization from the Fed itself about its performance.

“Indeed, there would be no point to this proposal, given Humphrey-Hawkins, if it were not the intention of the bill’s proponents to exert congressional control of monetary policy decisions in a way that the Humphrey-Hawkins testimony alone does not allow them to,” argues Michael Woodford, an economics professor at Columbia University.

Wow. Having the Fed Chairman testify twice a year to Congress is the equivalent of a GAO audit? Put your crack pipe down professor.

How might more influence be exerted? Economist Anil Kashyap of the University of Chicago thinks an audit suggests the GAO and Congress could force the Fed to supply all the background information that goes into an interest-rate decision and compel all members of the FOMC to share their individual thinking on any issue in real time.

“The spirit of the Paul bill seems to be that having FOMC meetings live on C-SPAN would be best way to make monetary policy. That would be a disaster.”

This is laughable. The bill would merely require an audit be done by the GAO by the end of 2010. The “spirit” suggested here is an evil fantasy concocted in a feeble effort to find something to criticize the bill for. Allow me to present the summary of HR.1207 for Mr. Kashyap:

Directs the Comptroller General to complete, before the end of 2010, an audit of the Board of Governors of the Federal Reserve System and of the federal reserve banks, followed by a detailed report to Congress.

Any detractor of Fed transparency who tries to paint the picture that Paul’s bill is an effort to televise FOMC meetings live does not understand English.

Pethokoukis continues:

The effect on the economy might not be so beneficial, either. Even if the result of the Fed bill is only more aggressive congressional questioning and criticism, financial markets might well fear the bank would start taking congressional wishes into account when making policy.

There is more to the economy than “financial markets”. Even if an audit results in more aggressive questioning, would that be a bad thing? It gets pretty aggressive already (see Grayson) and it seems to have little or no effect on the economy or financial markets. The Fed Chairman is a big boy. He deserves to be questioned aggressively given his position and power with our money.

If the Fed were to begin taking congressional wishes into account when making policy, it wouldn’t be such a bad thing. As it stands right now, the only boss is the President. Perhaps a little congressional oversight would be another check on runaway executive power. Of course, the President would still have the ultimate power over the Fed chairman. He can fire him should the chairman attempt to cut his own puppet strings.

“I’ll take transparency for $1000, Alex.”