I

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.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Economic Growth and

5 Price Stability Act of 1995’’.
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1 SEC. 2. FINDINGS; STATEMENT OF POLICY.

2 (a) FINDINGS.—The Congress finds that—

3 (1) during the 25 years preceding the date of

4 enactment of this Act, the United States experienced

5 a deterioration of potential economic growth;

6 (2) there is sufficient evidence to suggest that

7 increased Government spending, deficits, high taxes,

8 and regulation have significantly contributed to

9 slower economic growth, higher inflation, and dimin10 ished expectations;

11 (3) micromanagement of the economy and fine

12 tuning have not alleviated economic hardship;

13 (4) the conditions and goals established by the

14 Full Employment and Balanced Growth Act of

15 1978, have not been and could not be met, and con16 tinue to cause confusion and ambiguity about the

17 appropriate role of monetary policy;

18 (5) the multiple policy goals of the Board of

19 Governors of the Federal Reserve System, stipulated

20 in the Full Employment and Balanced Growth Act

21 of 1978, have created uncertainty about the aims of

22 monetary policy, which can add to volatility in eco23 nomic activity and financial markets, costing work24 ers jobs and harming economic growth;

25 (6) there is a need for the Congress to clarify

26 the proper role of the Board of Governors of the
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1 Federal Reserve System in economic policymaking,

2 in order to achieve the best environment for long3 term economic growth and the lowest possible inter4 est rates;

5 (7) recognizing the dangers of inflation and the

6 appropriate role of monetary policy, political leaders

7 in countries throughout the world are directing the

8 central banks of those countries to institute reforms

9 that focus monetary policy on the single objective of

10 price stability, rather than on multiple policy goals;

11 and

12 (8) because price stability leads to the lowest

13 possible interest rates and is a key condition to

14 maintaining the highest possible levels of productiv15 ity, real incomes, living standards, employment, and

16 global competitiveness, price stability should be the

17 primary long-term goal of the Board of Governors of

18 the Federal Reserve System.

19 (b) STATEMENT OF POLICY.—It is the policy of the

20 United States that—

21 (1) the principal economic responsibilities of the

22 Government are to establish and ensure an environ23 ment that is conducive to both long-term economic

24 growth and increases in living standards, by estab25 lishing and maintaining free markets, low taxes, re-
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1 spect for private property, and the stable, long-term

2 purchasing power of the United States currency; and

3 (2) the primary long-term goal of the Board of

4 Governors of the Federal Reserve System should be

5 to promote price stability.

6 SEC. 3. MONETARY POLICY.

7 (a) AMENDMENT TO THE FEDERAL RESERVE ACT.—

8 Section 2A of the Federal Reserve Act (12 U.S.C. 225a)

9 is amended to read as follows:

10 ‘‘SEC. 2A. MONETARY POLICY.

11 ‘‘(a) PRICE STABILITY.—The Board of Governors of

12 the Federal Reserve System (hereafter in this section re13 ferred to as the ‘Board’) and the Federal Open Market

14 Committee (hereafter in this section referred to as the

15 ‘Committee’) shall—

16 ‘‘(1) establish an explicit numerical definition of

17 the term ‘price stability’; and

18 ‘‘(2) maintain a monetary policy that effectively

19 promotes long-term price stability.

20 ‘‘(b) CONGRESSIONAL CONSULTATION.—Not later

21 than February 20 and July 20 of each year, the Board

22 shall consult with the Congress at semiannual hearings be23 fore the Committee on Banking, Housing, and Urban Af24 fairs of the Senate and the Committee on Banking and

25 Financial Services of the House of Representatives, about
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1 the objectives and plans of the Board and the Committee

2 with respect to achieving and maintaining price stability.

3 ‘‘(c) CONGRESSIONAL OVERSIGHT.—The Board

4 shall, concurrent with each semiannual hearing required

5 by subsection (b), submit a written report to the Congress

6 containing—

7 ‘‘(1) numerical measures to help assess the ex8 tent to which the Board and the Committee are

9 achieving and maintaining price stability in accord10 ance with subsection (a);

11 ‘‘(2) a description of the intermediate variables

12 used by the Board to gauge the prospects for achiev13 ing the objective of price stability; and

14 ‘‘(3) the definition, or any modifications there15 to, of ‘price stability’ established in accordance with

16 subsection (a)(1)(A).’’.

17 (b) COMPLIANCE ESTIMATE.—Concurrent with the

18 first semiannual hearing required by section 2A(b) of the

19 Federal Reserve Act (as amended by subsection (a) of this

20 section) following the date of enactment of this Act, the

21 Board of Governors of the Federal Reserve System shall

22 submit to the Congress a written estimate of the length

23 of time it will take for the Board and the Committee to

24 fully achieve price stability. The Board and the Committee

25 shall take into account any potential short-term effects on
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1 employment and output in complying with the goal of

2 price stability.

3 SEC. 4. REPEAL OF OBSOLETE PROVISIONS.

4 (a) FULL EMPLOYMENT AND BALANCED GROWTH

5 ACT OF 1978.—The Full Employment and Balanced

6 Growth Act of 1978 (15 U.S.C. 3101 et seq.) is repealed.

7 (b) EMPLOYMENT ACT OF 1946.—The Employment

8 Act of 1946 (15 U.S.C. 1021 et seq.) is amended—

9 (1) in section 3—

10 (A) in the section heading, by striking

11 ‘‘AND SHORT-TERM ECONOMIC GOALS AND

12 POLICIES’’;

13 (B) by striking ‘‘(a)’’; and

14 (C) by striking ‘‘in accord with section

15 11(c) of this Act’’ and all that follows through

16 the end of the section and inserting ‘‘in accord17 ance with section 5(c).’’;

18 (2) in section 9(b), by striking ‘‘, the Full Em19 ployment and Balanced Growth Act of 1978,’’;

20 (3) in section 10—

21 (A) in subsection (a), by striking ‘‘in the

22 light of the policy declared in section 2’’;

23 (B) in subsection (e)(1), by striking ‘‘sec24 tion 9’’ and inserting ‘‘section 3’’; and
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1 (C) in the matter immediately following

2 paragraph (2) of subsection (e), by striking

3 ‘‘and the Full Employment and Balanced

4 Growth Act of 1978’’;

5 (4) by striking section 2;

6 (5) by striking sections 4 through 8; and

7 (6) by redesignating sections 3, 9, 10, and 11

8 as sections 2 through 5, respectively.

9 (c) CONGRESSIONAL BUDGET ACT OF 1974.—Title

10 III of the Congressional Budget Act of 1974 (2 U.S.C.

11 631 et seq.) is amended—

12 (1) in section 301—

13 (A) in subsection (b), by striking para14 graph (1) and redesignating paragraphs (2)

15 through (8) as paragraphs (1) through (7), re16 spectively;

17 (B) in subsection (d), in the second sen18 tence, by striking ‘‘the fiscal policy’’ and all

19 that follows through the end of the sentence

20 and inserting ‘‘fiscal policy.’’;

21 (C) in subsection (e), in the second sen22 tence, by striking ‘‘as to short-term and me23 dium-term goals’’; and

24 (D) by striking subsection (f) and inserting

25 the following:
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1 ‘‘(f) [Reserved.]’’; and

2 (2) in section 305—

3 (A) in subsection (a)(3), by inserting be4 fore the period at the end ‘‘, as described in

5 section 2 of the Economic Growth and Price

6 Stability Act of 1995’’;

7 (B) in subsection (a)(4)—

8 (i) by striking ‘‘House sets forth the

9 economic goals’’ and all that follows

10 through ‘‘designed to achieve,’’ and insert11 ing ‘‘House of Representatives sets forth

12 the economic goals and policies, as de13 scribed in section 2 of the Economic

14 Growth and Price Stability Act of 1995,’’;

15 and

16 (ii) by striking ‘‘such goals,’’ and all

17 that follows through the end of the para18 graph and inserting ‘‘such goals and poli19 cies.’’;

20 (C) in subsection (b)(3), by inserting be21 fore the period at the end ‘‘, as described in

22 section 2 of the Economic Growth and Price

23 Stability Act of 1995’’; and

24 (D) in subsection (b)(4)—
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1 (i) by striking ‘‘goals (as’’ and all that

2 follows through ‘‘designed to achieve,’’ and

3 inserting ‘‘goals and policies, as described

4 in section 2 of the Economic Growth and

5 Price Stability Act of 1995,’’; and

6 (ii) by striking ‘‘such goals,’’ and all

7 that follows through the end of the para8 graph and inserting ‘‘such goals and poli9 cies.’’.

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