I’ve given some thought to the debate regarding Summers vs. Yellen for Fed Chairperson and have come to the conclusion that it is framed in a way that results in a scenario, probably more based in reality than not, of the tail wagging the dog – The Fed goes off and does whatever it wishes under the leadership of the person appointed to the post with little or no accountability.
If the power that the Fed exercises is taken into account, Article I section 8 of the US Constitution, the power delegated to Congress to coin money and regulate the value thereof, and the implementation of that power being The Full Employment and Balanced Growth Act (some parts of it are unconstitutional based on the separation of powers in my opinion – more on that later), the scenario we are currently debating, the economic impact of the person ultimately appointed to the post, seems particularly absurd in a democratic and free society. Even if the financial regulatory function the Fed is currently occupying is also taken into account, it should not matter who is appointed to that post, provided he or she is ethical. The law is the law – and if it matters who is occupying that post in practice, then perhaps we are debating the wrong issue.
My opinion of the whole mess is that all roads of blame lead back to the congress critters and state legislatures for allowing the tyrannical condition to develop where this particular appointment has such a profound and lasting impact on our quality of life with no accountability. Considering that Obama wants to appoint Summers as badly as he does, he should be put in the position to have to give something up in order to get it. Summers gets the appointment in exchange for something like a nominal stability monetary constitution complete with accountability. If Summers wants the job, he has to follow the law or he has to go.
This debate presents a golden opportunity to reorganize the Fed so that it makes sense for a modern, technologically advanced economy, appropriate monetary policy for which cannot be maintained by committee; and if compromising on the appointment of Summers as Fed Chairperson is one way to get that, we should go for it. Therefore, I support Summers for Fed Chairman if, and only if, it results in a modernized and accountable Federal Reserve System.
Some thoughts on the particulars of the plan are:
1) The President has no Constitutional authority over monetary policy due to the separation of powers, thus should have only the responsibility of making appointments for the purpose of filling vacant posts. If the President declines to meet that obligation within a certain period of time, Congress may proceed to fill the posts.
2) Appointees should be subjected to congressional reconfirmation at intervals of no more than 4 years, preferably every 2 years.
3) Day to day conduct of monetary policy should be operationalized (automated) with information technology that is programmed to follow rules set forth in the legislative implementation of monetary policy mandates with a majority vote in both houses of congress needed to override or update the rules.
4) The Federal Reserve Chairman should be subject to removal by a majority vote in both houses of Congress, or accountability may be implemented based on some trigger that indicates the lack of nominal stability (not inflation or interest rates!).
5) No more ignoring the law, doing as it pleases while everyone else suffers for it with no end.
PS: Supporting a plan such as this that could incorporate NGDPLT separates real liberals from the statists. The fact that we’re not hearing anything about movement in that direction in congress has something important to reveal about both parties running it.
PPS: Sort of tongue in cheek: Too bad we’re not Egypt with the military sympathetic to the benefits and necessity of maintaining constitutionality and rule of law when the democratic institutions fail to provide it.