The Economic Growth, Regulatory Relief, and Consumer Protection Act, a Dodd-Frank semi-rollback that's expected to pass with bipartisan support.Sen. Rand Paul (R-Kentucky) this week is once again trying to overcome his own party's reluctance to act in power how it campaigned in opposition, by introducing his stalled-out bill to audit the Federal Reserve as an amendment to
"I think it always has a chance of passing, but the hardest part is actually getting a vote on things," Paul told me in an interview today. "You never know unless you try."
If Republican politicians meant what they said, Audit the Fed would already be the law of the land. The proposal, first introduced and popularized by longtime congressman and three-time presidential candidate Ron Paul, was included in the last two GOP platforms, passed by the House of Representatives in 2012 (by a 327-98 vote) and 2014 (333-92), and campaigned on by Donald Trump ("It is so important to audit The Federal Reserve," Trump tweeted in February 2016).
Yet it's a different story when the GOP holds power. The latest House Audit the Fed bill, sponsored by Paul pal Rep. Thomas Massie (R-Kentucky), was put in that Raiders of the Lost Ark warehouse, while companion Paul legislation didn't even get that far. (Paul did whip 53 votes back in January 2016, but that fell short of the 60 required; see my interview with him at the time for more.)
As for President Trump, Paul's father Ron complains that "he has not even uttered the words 'Audit the Fed,' or talked about any changes to monetary policy, since the election." Yet the younger Paul, who—in contrast to Senate colleagues such as Jeff Flake—has maintained a productive relationship with Trump, remains hopeful. "We've talked about Audit the Fed before and the fact that he supported it during his campaign," he said. "I think he will sign Audit the Fed if we can get it to him. The hardest part that we have to overcome is the institution of the Fed itself. The biggest lobbyist on Capitol Hill against auditing the Fed is the Fed."
That obstacle was only made more difficult after Trump appointed as his new Federal Reserve Chair the central bank's principal spokesman against Paul's legislation: Jerome Powell. (The senator was one of just 13 votes against Powell's confirmation). Powell reiterated his opposition to Audit the Fed during confirmation hearings. "Congress has chosen to shield monetary policy from a policy audit," he told senators. "That has been a wise choice made to show respect for the independence of monetary policy….A [Government Accountability Office] audit would be a way for Congress to insert itself into the making of monetary policy on a meeting-by-meeting basis."
Paul dismisses such arguments. "I kind of think it's unseemly that…an entity created by government lobbies its own government not to have sunlight and not to be audited," he said. "What we have now is…a fake audit. What you see is that there is an audit by the GAO, but they don't audit any of the things that the Fed owns. The Fed owns over $4 trillion worth of stuff, and none of that is reported in the audit. I kind of tongue in cheek say, 'Yeah, they audit how much coffee they buy, they audit what their salaries are, and, you know, whether or not they're going to Las Vegas on a holiday on government expense.' That is audited, but then the $4 trillion worth of stuff is not. We don't know whether it's marked to market, we don't know whether they bought it from their cousin. There needs to be more sunlight on what they own, what they pay for, and what it's valued."
What is Paul's impression of Powell's approach to monetary policy? "I think he's—like so many that have been at the Fed—he's a strong believer in basically price controls on money. This is basically the Fed fixing the interest rate. I think there's some irony that some people who claim to be limited government people—would be against price controls on bread, houses, furniture, et cetera, on almost every item in the economy—but then when it comes to the price of something that's in every transaction, the price of money, they're for fixing that price. I think every argument against price controls and the distortions it causes go doubly so or triply so for money, because money is a part of every transaction. If you fix the price of money, you send a signal to the economy often that everything's just fine."
So will Paul's amendment get a vote? "Well, it needs the acquiescence of the majority party," he said. "The Republican party has to allow it to happen." That's not promising news. "Typically in the last year or so, almost no amendments have been voted on."
So Republicans are all in favor of auditing the Federal Reserve, except when they have the power to do so. It's enough to make the naïve turn cynical about politics.
"I think that's one of the biggest frustrations, when you talk to constituents, or when I am home on the weekends and meet fellow Kentuckians," Paul said. "They're like, 'You guys promised if we gave you the House, you'd do this. Then you said we have to have the Senate. Then you said we have to have the presidency. We gave you all three. What are you guys doing up there?'
"Particularly on the debt: I think people are very unhappy with the idea that we're going back to trillion-dollar annual deficits when we control all three branches of government. That really got me going and very upset. I think you'll find that a lot of people outside the Beltway are in the same position as I am."