Must-Read: Is “Audit the Fed” like creating the CBO, or like trying to destroy the CBO? Does the Federal Reserve need more oversight from the Congress, or less?

Shades of the Mytilene and Syracuse debates: with respect to the Federal Reserve, is Congress best seen as (a) a useful oversight body, or (b) a source of chaos and policy disaster that should be kept far away from a closed guild of hermetic monetary technocrats?

The very smart Peter Conti-Brown weighs in, tentatively, in favor of (b):

Peter Conti-Brown: Health Care, the Congressional Budget Office, and “Audit the Fed”: “One of the most intriguing institutional players… was the Congressional Budget Office…

…[its] verdict on the nature of cuts to Medicaid and the increased number of the uninsured became a rallying cry for those opposed to the Republicans’ efforts…. The CBO’s role… led to deep criticisms…. The White House cast aspersions on the credibility of past CBO analysis. President Trump’s budget director, former Republican Congressman Mick Mulvaney, offered an even more existential critique, saying that the CBO’s role providing independent analysis has “probably come and gone.” And the House Freedom Caucus, that group of legislators who pride themselves on their fiscal conservatism, would essentially gut the CBO… [which] was created toward the end of the Nixon Administration as a means of asserting Congress’s role in the budgetary process….

Its role also extended to creating a common ground for legislators to understand the consequences of any proposed legislative change. It’s not a very old office, but its role is about resolving a conflict of interest: when the president asks Congress to exercise its power of the purse, Congress, through the CBO, has a means of checking the math behind these requests…. I have an informed citizen’s level of expertise and opinion on health care policy, not more. But the CBO’s role in the health care debate and especially its treatment by the Republican critics remind me of a similar debate about the Federal Reserve. The so-called “Audit the Fed” bill…. Their pitch is simple…. We don’t need to eliminate the central bank altogether, but we need to make it more answerable to the common citizen through her representatives in Congress….

First is the misleading use of accounting jargon to accomplish a task that has nothing to do with accounting…. The strongest argument in favor of increasing Congress’s ability to oversee the Fed through the GAO has always been the CBO argument…. Congress has a few dozen overstretched staffers trying to make sure the Fed is doing the work it is designed to do. The “Audit the Fed” bill is designed, its proponents say, to even the playing field by harnessing the expertise and resources of the GAO. Republican hostility to the CBO’s inconvenient analysis of the health care bills should call into question the sincerity of this view….

The overlap between those who support Audit the Fed and those who would repeal the ACA is extensive. If the resource mismatch argument were really motivating Fed reformers—that is, if the motivation for the political audit of the Fed is about institutional credibility and congressional oversight—we should’ve seen many, many more Republicans calling foul on CBO criticism. Instead, we see fouls called on the CBO itself. The Republican reaction to the CBO provides strong evidence that the “resource mismatch” argument is part of a marketing campaign to give partisans more tools to accomplish partisan ends. I would expect that under an Audit the Fed regime the first time the GAO reaches a conclusion about Fed policy that is inconvenient for partisans, we will see the CBO criticisms redux. At that point, the whole exercise of Audit the Fed will be worse than pointless: we will have also damaged the Fed, the GAO, and congressional oversight in the process.