Opponents of the Audit the Fed legislation claim that allowing the Government Accountability Office (GAO) to Audit the Fed would somehow "politicize" the Fed by giving Congress power to dictate monetary policy. The Wall Street Journal's real-time economics blog reports the reaction of some former GAO officials to this claim (SPOILER ALERT: Like every other argument thrown up by the Fed, this one has no merit):
Former officials and employees of the Government Accountability Office are growing dismayed by the debate over whether their agency should be allowed to review the Federal Reserve’s monetary policy decisions.
These onlookers suggest critics of the proposal are maligning the GAO by saying it would put political pressure on the Fed, potentially influencing interest rate decisions in a way that could hurt the economy.
“The GAO will not allow itself to be abused,” said David Walker, who led the agency from 1998 to 2008. “It conducts its work on a fact-based, nonpartisan, nonideological fashion.”
Stirring the debate is Sen. Rand Paul’s (R., Ky.) so-called Audit the Fed bill, which he says would bring greater transparency to the central bank’s activities. “I think there needs to be some sunshine,” he told a rally in Iowa in February.
Fed and White House officials oppose it, seeing it as a tool for politicizing the central bank’s deliberations. Fed governor Jerome Powell said in a speech last month the bill “risks inserting the Congress directly into monetary policy decision-making, reversing decades of deliberate effort by the Congress to insulate the Fed from political pressure in carrying out its day-to-day duties.”
But the GAO’s defenders say lawmakers wouldn’t be able to use the agency to pressure the Fed, even if they wanted to.
“A lot of people in Congress will tell you they can push the GAO around,” said Charles Bowsher, the comptroller general from 1981 to 1996. “I wouldn’t rule out that maybe someone over there would try to do it, but the truth is the GAO knows how to deal with that kind of pressure.”
Fed Chairwoman Janet Yellen opposes Mr. Paul’s bill, and in recent congressional testimony she questioned whether Paul Volcker, the Fed chair from 1979 to 1987, would have been successful in bringing down inflation if not for the law that prohibits GAO from auditing monetary policy.
Mr. Bowsher, who ran GAO during Mr. Volcker’s time scoffed at her suggestion, noting Mr. Volcker’s reputation as a dominating figure. “An idea that a GAO report or GAO comptroller general would ever get in the way of Paul Volcker is ridiculous,” said Mr. Bowsher.
The agency’s staffers strive to be politically neutral, said Katherine Schinasi, a retired GAO managing director.
“Over the course of a 30-some-year career, you are going to be working when the committee chair requesting a GAO review is a Republican and when the chair is a Democrat,” said Ms. Schinasi. “You cannot be favorable toward one knowing that the next time it will be the other. You have to stay in the middle, as it were, to maintain independence. GAO has developed a set of standards and processes, which it follows almost slavishly, that provide it protection.”
Former employees describe a process in which every line of GAO reports are double-checked by multiple officials to make sure the facts are accurate, the claims supported, and any needlessly politicizing landmines avoided.
“GAO is so focused on making sure the information in the reports is accurate and can be defended that it probably makes GAO more hesitant to make direct statements,” said Ellen Rubin, a former GAO senior analyst who is now a professor of public administration and policy at University at Albany-SUNY.
This is just the latest evidence that critics of the audit bill do not have a valid argument against this simple bill. If you have not done so yet, sign your Bring It to the Floor petition.
Tags: Audit the Fed