WASHINGTON – Frustrated with continuing high levels of unemployment, lawmakers turned Tuesday to debating who was more responsible for failing to correct the challenges in the economy: the Federal Reserve Board or Congress.
Rep. David Schweikert, R-Ariz., said the Fed has effectively usurped Congress' role in dealing with fiscal policy, questioning whether the central bank's actions have allowed lawmakers to shirk their own responsibilities.
He was seconded by Rep. Kevin Brady, R-Texas, the author of a bill to strip the Fed of a statutory mandate to worry about employment.
"If in fact the dual mandate is the right answer and the Fed is in charge of the economy, it's certainly not doing a good job," said Brady, citing the weakest recovery since the Great Depression. "At the end of the day, it's our responsibility."
Brady's bill, named the Sound Dollar Act, would remove the so-called dual mandate and keep the central bank strictly focused on inflation.
Testifying during the monetary policy subcommittee hearing chaired by Rep. Ron Paul, Rep. Barney Frank pushed a counterproposal. He has introduced a bill that would deny Federal Reserve Bank presidents a vote at Federal Open Market Committee meetings, arguing that because they are not nominated by the president and confirmed by the Senate, they should not have a significant role in the country's fiscal policy.
But Frank rejected the notion that the Fed should be blamed for Congress' failure to take up and pass a bill setting out its own economic policies.
"It's our fault if we don't step up," Frank said. "The problem is we have very different views about how to do it – and that's democracy," he said.
Alice Rivlin, former vice chair of the Fed, who testified on a second panel with outside experts, also opposed stripping the Fed of its dual mandate, saying doing so would send the wrong message to the public.
"To change the language of the law to imply the Fed's only concern should be inflation would send a misleading signal to a public rightly concerned about jobs and growth, as well as inflation," said Rivlin. "It would imply that inflation is a serious current threat to American prosperity, which seems to me unwarranted. What we need now is a continuation of accommodative monetary policy plus fiscal policy that combines additional investment in long run growth and jobs with credible long run actions to stabilize the debt."
Lawmakers have been critical of Fed Chairman Ben Bernanke's tenure as the central bank has taken unusual steps to be more accommodative in its policies to help bolster the economy, but have still faced high unemployment numbers.
Bernanke last month offered a stark warning that if lawmakers failed to take action there would be little the Fed could do to offset a negative impact.
"If no action were to be taken by the fiscal authorities, the size of the fiscal cliff is such that there's absolutely no chance that the Federal Reserve could or would have any ability whatsoever to offset that effect on the economy," Bernanke said at the Fed's April news conference.
The chairman has previously warned that the economy is heading toward a "fiscal cliff" as massive spending cuts and tax increases are trigged in January which will have a big impact on the economy and hurt the recovery.
But Brady said the Fed shouldn't be trying so hard, arguing it is only enabling others to avoid painful choices.
"The Fed is trying to do too much to make up for some failed economic policies of the White House," said Brady. "I believe the more the Fed does the less responsibility that the White House and Congress are taking."
Bernanke has consistently stopped short of providing lawmakers with recommendations, but has stressed the need for Congress to take action to help the economy.
"It's imperative for Congress to give us a fiscal policy that achieves two principal objectives," said Bernanke at the same news conference. "The first is to achieve fiscal sustainability over the longer term. At the same time, I think that can be done in a way that doesn't endanger the short-term recovery of the economy."