The opportunity for pro-growth tax reform (lower rates with a broader base) and pro-growth regulatory reform (with rigorous cost-benefit tests) is now better than it has been in years, because of similarities between reform ideas put forth by Congress—many in bills that have passed the House—and those put forth by president-elect Trump.
Although less commented on, the opportunity for monetary reform also seems better than it has been in years. And the reason is the same. Goals such as insulating the Fed from political pressures and creating a more predictable-transparent-accountable policy appear to be common to the Congress and the incoming Administration. To see this, take a look at the often-overlooked monetary passages on pages 44 and 45 of the House economic reform document A Better Way: The Economy. Here’s an excerpt:
“… our economy would be healthier if the Federal Reserve was more predictable in its conduct of monetary policy and more transparent about its decision-making…. Legislation sponsored by Rep. Bill Huizenga and approved by the House – the Fed Oversight Reform and Modernization Act (the FORM Act) does the following:
- Protects the Fed’s independence to chart whatever monetary policy course it deems appropriate, but requires the Fed to give the American people a greater accounting of its actions.
- Requires the Fed to generate a monetary policy strategy of its own choosing in order to provide added transparency about the factors leading to its monetary policy decisions.
- Helps consumers and investors make better decisions in the present and form better expectations about the future.
These improvements are important for Americans to enjoy greater economic opportunity. By pursuing this expansion through increased transparency instead of policy mandates, the FORM Act further insulates the Fed from political pressures.”
Here is a detailed statement of support of this monetary reform from economists and practitioners. Of course, there is much to be worked out, including incorporating constructive comments from the Fed, which has not yet been forthcoming. Monetary reform is at least as controversial as tax and regulatory reform, but no less crucial to a prosperous economy. The economics behind pursuing monetary, tax and regulatory reforms together can be found in First Principles: Five Keys to Restoring America’s Prosperity.