The job of America’s Federal Reserve System, commonly know as the Fed, is to maximize employment, stabilize prices, make sure that the nation’s banks are stable and taking care of our money and conduct impartial research so American businesses and individuals have a better basis for their individual decision-making.
The job of the Fed is not to solve climate change, societal inequity, systemic bias, or meddle in a whole variety of other contentious political issues that some in the progressive wing of the Democratic Party would like to see as part of the party’s daily agenda.
Voters elect representatives to wrestle with such issues. They’re not the Fed’s job, not least because the entity is supposed to be an independent central bank that is neither elected nor beholden to the political administration of the day.
As such, its hugely influential (and sometimes painful) policy decisions do not have to be approved by the White House, or any other branch of government. In the event of a financial crisis, hardly a far-fetched notion given current circumstances, the Fed was designed to be able to rise above and maintain the confidence of all Americans.
So we were glad to hear Chair Jerome Powell reiterate this philosophy during a recent panel discussion in Sweden, citing the controversial nature of many of these political issues, rightfully the province of elected representatives. “We are not, and will not be,” he said, “a ‘climate policymaker.’ ” Exactly right.
In making such an assertion, Powell had the courage to stand up against the kind of mission creep that you can also see in many unions, such as the Chicago Teachers Union, an entity formed out of necessity to bargain over the salaries and work conditions of its members, but that morphed over time to focus on a much wider gamut of radical and keenly partisan political objectives for the city as a whole, many only peripherally to do with the conditions for teachers in the workplace. Predictably, that has led to a backlash, and a dissipated focus.
There’s nothing wrong with fighting for social change, of course, and the problem of climate change surely demands legislators’ attention. But we also need trusted, impartial, nonpolitical institutions that are there as safety valves and regulators and are charged with doing unpopular things for the greater good. If the Fed gets involved in what Powell called “social benefits that are not tightly linked to our statutory goals and authorities,” it risks threatening its own independence.
Better for the Fed to stick to reining in inflation and achieving that much-hoped-for soft landing. No need to wallow in political mud baths.