To require the 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.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Price Stability Act of 2008''.

SEC. 2. FINDINGS; STATEMENT OF POLICY.

    (a) Findings.--The Congress finds the following:
            (1) Price stability is a prerequisite for sustainable long-
        term economic growth, job creation, and moderate interest 
        rates.
            (2) Inflation erodes the value of Americans' income and 
        savings.
            (3) Inflation distorts the pricing system and the efficient 
        allocation of resources in the economy.
            (4) Inflation makes long-term planning difficult and raises 
        the effective tax rate on capital, thereby impeding investment.
            (5) Through its determination of monetary policy, the Board 
        of Governors of the Federal Reserve System is ultimately 
        responsible for controlling the long-run rate of inflation in 
        the economy.
            (6) The multiple policy goals of the Full Employment and 
        Balanced Growth Act of 1978 cause confusion and ambiguity about 
        the appropriate role and aims of monetary policy, which can add 
        to volatility in economic activity and financial markets.
            (7) 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 job creation.
            (8) An explicit price stability goal would promote 
        transparency, accountability and credibility in monetary 
        policy.
            (9) Price stability should be the primary long-term goal of 
        the Board of Governors of the Federal Reserve.
    (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 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) Market Stability and Liquidity.--Subsection (a) shall not be 
construed as a limitation on the authority or responsibility of the 
Board--
            ``(1) to provide liquidity to markets in the event of a 
        disruption that threatens the smooth functioning and stability 
        of the financial sector; or
            ``(2) to serve as a lender of last resort under this Act 
        when the Board determines such action is necessary.
    ``(c) 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 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.
    ``(d) Congressional Oversight.--The Board shall, concurrent with 
each semiannual hearing required by subsection (c), 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 the 
        term `price stability' established in accordance with 
        subsection (a)(1).''.
    (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 Federal Open Market 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 
hereby repealed.
    (b) Employment Act of 1946.--The Employment Act of 1946 (15 U.S.C. 
1021 et seq.) is amended--
            (1) in section 3 (15 U.S.C. 1022)--
                    (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) (15 U.S.C. 1022f(b)), by striking ``, 
        the Full Employment and Balanced Growth Act of 1978,'';
            (3) in section 10 (15 U.S.C. 1023)--
                    (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, 5, 6, 7, and 8; and
            (6) by redesignating sections 3, 9, 10, and 11 as sections 
        2, 3, 4, and 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 (9) as 
                paragraphs (1) through (8), 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)(1), 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) Repealed''; 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 
                Price Stability Act of 2008'';
                    (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 Price Stability Act of 2008,''; 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 
                Price Stability Act of 2008''; 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 Price Stability Act of 
                        2008,''; and
                            (ii) by striking ``such goals,'' and all 
                        that follows through the end of the paragraph 
                        and inserting ``such goals and policies.''.

Summary: Price Stability Act of 2008 - Declares it is US policy that the principal economic responsibilities of the Government are to establish both long-term economic growth and increases in living standards, maintain free markets, low taxes, respect for private property, and the stable, long-term purchasing power of US currency. Declares that the promotion of price stability should be the primary long-term goal of the Board of Governors of the Federal Reserve System. Amends the Federal Reserve Act to revise the mandate of the Board and the Federal Open Market Committee to require them to: (1) establish a numerical definition of the term price stability. And (2) maintain a monetary policy that promotes long-term price stability. Requires the Board to consult with, and report to, Congress semi-annually about Board and Committee objectives and plans to achieve and maintain price stability. Repeals the Full Employment and Balanced Growth Act of 1978.