In 2020, the Squad said we must “reimagine the police,” which coincided with a vast increase in city crime throughout the country.
In 2021, they have moved on, claiming it is time to “reimagine” the Federal Reserve, which would more than likely cause chaos throughout the U.S. economy.
On August 31, Reps. Alexandria Ocasio-Cortez (D-NY), Rashida Tlaib (D-MI), Ayanna Pressley (D-MA), Mondaire Jones (D-NY), and Jesús G. “Chuy” García (D-IL) released a statement urging President Biden to “re-imagine a Federal Reserve focused on eliminating climate risk and advancing racial and economic justice.”
According to the Squad’s statement, “While the Federal Reserve has made positive changes to its approach to full employment reflected in the new monetary policy framework, our concerns with Chair Powell’s track record are two-fold.” First, “Under his leadership, the Federal Reserve has taken very little action to mitigate the risk climate change poses to our financial system. To illustrate, the Federal Reserve received a D- rating for its approach to climate risk policies from Positive Money’s Global Central Bank Scorecard, placing it at the bottom of the G20 Central Banks. At a time when the Intergovernmental Panel on Climate Change is warning of the potential catastrophic and irreversible damage inflicted by a changing climate, we need a leader at the helm that will take bold and decisive action to eliminate climate risk.”
Second, “Under Chair Powell, the Federal Reserve has substantially weakened many of the reforms enacted in the wake of the Great Recession regulating the largest banks, including capital and liquidity requirements, stress tests, the Volcker Rule, and living will requirements. During the 2008-financial crisis, millions of Americans lost their homes and jobs, and many have failed to fully recover. Weakening financial regulations that were specifically created to prevent such a disaster from happening again risks the livelihoods of Americans across the country.”
Before addressing the Squad’s criticisms of the Federal Reserve, perhaps it would be worthwhile to realize the role of the Federal Reserve in the first place.
Per its website, the mission of the Federal Reserve “is to foster the stability, integrity, and efficiency of the nation’s monetary, financial, and payment systems so as to promote optimal macroeconomic performance.”
In other words, the Federal Reserve is not tasked with mitigating the risk of climate change. It has never been, nor ever should be.
Moreover, the number one strategic goal of the Federal Reserve is to “conduct monetary policy that promotes the achievement of the Federal Reserve’s statutory objectives of maximum employment and stable prices.”
Were the Federal Reserve to be heavily involved in mitigating the risk of climate change, it is less likely it would be capable of fulfilling its primary goal. This would occur because fighting climate change, as the Squad has laid out many times, would require the Federal Reserve to funnel trillions of dollars into green energy boondoggles, thereby nullifying its principal goal.
Moreover, by getting on board with the Squad’s climate change agenda, the Federal Reserve would be at odds with its second strategic goal: “promote a safe, sound, competitive, and accessible banking system and stable financial markets.”
Using the Federal Reserve, as the Squad is calling for, to create a command-and-control economy in the name of mitigating climate change would be the antithesis of promoting safe, sound, competitive, and accessible financial markets.
On the other hand, it would foster a crony-capitalist system in which powerful, politically connected entities would have even more sway in the economy.
Aside from mitigating climate change, the Squad also argues the Federal Reserve should become involved with advancing racial and economic justice.
Once again, that is outside the realm of the Federal Reserve.
The Federal Reserve is not a social justice vehicle. Throughout its history, the Federal Reserve has been an independent institution. For the past century, it has remained above the political fray, rarely, if ever, weighing in on social/political disputes.
Yet, the Squad wants to reimagine the Federal Reserve. They want to make the Federal Reserve a leftist rubber-stamp institution, so they can use the Federal Reserve’s printing press to spend trillions on their Green New Deal and other radical social policies.
Under the left’s new economic dogma called modern monetary theory, the federal government can print money to no end, partly because the U.S. dollar is the world’s reserve currency. Moreover, they claim that if the Federal Reserve would accommodate them by printing trillions of dollars, they would be able to solve virtually any and all socio-economic problems.
Obviously, that is false. If the left were to use the Federal Reserve to fund their multi-trillion-dollar socialist makeover, inflation would worsen, and the U.S. economy would suffer major short- and long-term consequences.
After witnessing the destruction left in the wake of the Squad’s campaign to reimagine the police, do we really want to let these same people reimagine the Federal Reserve?
• Chris Talgo (firstname.lastname@example.org) is a senior editor at The Heartland Institute.