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H.R. 2445 (104th): Economic Growth and Price Stability Act of 1995

The text of the bill below is as of Sep 29, 1995 (Introduced).


HR 2445 IH

104th CONGRESS

1st Session

H. R. 2445

To require Board of Governors of the Federal Reserve System to focus on price stability in establishing monetary policy to ensure the stable, long-term purchasing power of the currency, to repeal the Full Employment and Balanced Growth Act of 1978, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

September 29, 1995

Mr. SAXTON (for himself, Mr. EWING, Mr. MCCOLLUM, and Mr. THORNBERRY) introduced the following bill; which was referred to the Committee on Banking and Financial Services, and in addition to the Committees on Economic and Educational Opportunities and the Budget, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned


A BILL

To require Board of Governors of the Federal Reserve System to focus on price stability in establishing monetary policy to ensure the stable, long-term purchasing power of the currency, to repeal the Full Employment and Balanced Growth Act of 1978, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ‘Economic Growth and Price Stability Act of 1995’.

SEC. 2. FINDINGS; STATEMENT OF POLICY.

    (a) FINDINGS- The Congress finds that--

      (1) during the 25 years preceding the date of enactment of this Act, the United States experienced a deterioration of potential economic growth;

      (2) there is sufficient evidence to suggest that increased Government spending, deficits, high taxes, and regulation have significantly contributed to slower economic growth, higher inflation, and diminished expectations;

      (3) micromanagement of the economy and fine tuning have not alleviated economic hardship;

      (4) the conditions and goals established by the Full Employment and Balanced Growth Act of 1978, have not been and could not be met, and continue to cause confusion and ambiguity about the appropriate role of monetary policy;

      (5) the multiple policy goals of the Board of Governors of the Federal Reserve System, stipulated in the Full Employment and Balanced Growth Act of 1978, have created uncertainty about the aims of monetary policy, which can add to volatility in economic activity and financial markets, costing workers jobs and harming economic growth;

      (6) there is a need for the Congress to clarify the proper role of the Board of Governors of the Federal Reserve System in economic policymaking, in order to achieve the best environment for long-term economic growth and the lowest possible interest rates;

      (7) recognizing the dangers of inflation and the appropriate role of monetary policy, political leaders in countries throughout the world are directing the central banks of those countries to institute reforms that focus monetary policy on the single objective of price stability, rather than on multiple policy goals; and

      (8) because price stability leads to the lowest possible interest rates and is a key condition to maintaining the highest possible levels of productivity, real incomes, living standards, employment, and global competitiveness, price stability should be the primary long-term goal of the Board of Governors of the Federal Reserve System.

    (b) STATEMENT OF POLICY- It is the policy of the United States that--

      (1) the principal economic responsibilities of the Government are to establish and ensure an environment that is conducive to both long-term economic growth and increases in living standards, by establishing and maintaining free markets, low taxes, respect for private property, and the stable, long-term purchasing power of the United States currency; and

      (2) the primary long-term goal of the Board of Governors of the Federal Reserve System should be to promote price stability.

SEC. 3. MONETARY POLICY.

    (a) AMENDMENT TO THE FEDERAL RESERVE ACT- Section 2A of the Federal Reserve Act (12 U.S.C. 225a) is amended to read as follows:

‘SEC. 2A. MONETARY POLICY.

    ‘(a) PRICE STABILITY- The Board of Governors of the Federal Reserve System (hereafter in this section referred to as the ‘Board’) and the Federal Open Market Committee (hereafter in this section referred to as the ‘Committee’) shall--

      ‘(1) establish an explicit numerical definition of the term ‘price stability’; and

      ‘(2) maintain a monetary policy that effectively promotes long-term price stability.

    ‘(b) CONGRESSIONAL CONSULTATION- Not later than February 20 and July 20 of each year, the Board shall consult with the Congress at semiannual hearings before the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Banking and Financial Services of the House of Representatives, about

the objectives and plans of the Board and the Committee with respect to achieving and maintaining price stability.

    ‘(c) CONGRESSIONAL OVERSIGHT- The Board shall, concurrent with each semiannual hearing required by subsection (b), submit a written report to the Congress containing--

      ‘(1) numerical measures to help assess the extent to which the Board and the Committee are achieving and maintaining price stability in accordance with subsection (a);

      ‘(2) a description of the intermediate variables used by the Board to gauge the prospects for achieving the objective of price stability; and

      ‘(3) the definition, or any modifications thereto, of ‘price stability’ established in accordance with subsection (a)(1)(A).’.

    (b) COMPLIANCE ESTIMATE- Concurrent with the first semiannual hearing required by section 2A(b) of the Federal Reserve Act (as amended by subsection (a) of this section) following the date of enactment of this Act, the Board of Governors of the Federal Reserve System shall submit to the Congress a written estimate of the length of time it will take for the Board and the Committee to fully achieve price stability. The Board and the Committee shall take into account any potential short-term effects on employment and output in complying with the goal of price stability.

SEC. 4. REPEAL OF OBSOLETE PROVISIONS.

    (a) FULL EMPLOYMENT AND BALANCED GROWTH ACT OF 1978- The Full Employment and Balanced Growth Act of 1978 (15 U.S.C. 3101 et seq.) is repealed.

    (b) EMPLOYMENT ACT OF 1946- The Employment Act of 1946 (15 U.S.C. 1021 et seq.) is amended--

      (1) in section 3--

        (A) in the section heading, by striking ‘and short-term economic goals and policies’;

        (B) by striking ‘(a)’; and

        (C) by striking ‘in accord with section 11(c) of this Act’ and all that follows through the end of the section and inserting ‘in accordance with section 5(c).’;

      (2) in section 9(b), by striking ‘, the Full Employment and Balanced Growth Act of 1978,’;

      (3) in section 10--

        (A) in subsection (a), by striking ‘in the light of the policy declared in section 2’;

        (B) in subsection (e)(1), by striking ‘section 9’ and inserting ‘section 3’; and

        (C) in the matter immediately following paragraph (2) of subsection (e), by striking ‘and the Full Employment and Balanced Growth Act of 1978’;

      (4) by striking section 2;

      (5) by striking sections 4 through 8; and

      (6) by redesignating sections 3, 9, 10, and 11 as sections 2 through 5, respectively.

    (c) CONGRESSIONAL BUDGET ACT OF 1974- Title III of the Congressional Budget Act of 1974 (2 U.S.C. 631 et seq.) is amended--

      (1) in section 301--

        (A) in subsection (b), by striking paragraph (1) and redesignating paragraphs (2) through (8) as paragraphs (1) through (7), respectively;

        (B) in subsection (d), in the second sentence, by striking ‘the fiscal policy’ and all that follows through the end of the sentence and inserting ‘fiscal policy.’;

        (C) in subsection (e), in the second sentence, by striking ‘as to short-term and medium-term goals’; and

        (D) by striking subsection (f) and inserting the following:

    ‘(f) [Reserved.]’; and

      (2) in section 305--

        (A) in subsection (a)(3), by inserting before the period at the end ‘, as described in section 2 of the Economic Growth and Price Stability Act of 1995’;

        (B) in subsection (a)(4)--

          (i) by striking ‘House sets forth the economic goals’ and all that follows through ‘designed to achieve,’ and inserting ‘House of Representatives sets forth the economic goals and policies, as described in section 2 of the Economic Growth and Price Stability Act of 1995,’; and

          (ii) by striking ‘such goals,’ and all that follows through the end of the paragraph and inserting ‘such goals and policies.’;

        (C) in subsection (b)(3), by inserting before the period at the end ‘, as described in section 2 of the Economic Growth and Price Stability Act of 1995’; and

        (D) in subsection (b)(4)--

          (i) by striking ‘goals (as’ and all that follows through ‘designed to achieve,’ and inserting ‘goals and policies, as described in section 2 of the Economic Growth and Price Stability Act of 1995,’; and

          (ii) by striking ‘such goals,’ and all that follows through the end of the paragraph and inserting ‘such goals and policies.’.