II

106TH CONGRESS

1ST SESSION S. 1492

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.

IN THE SENATE OF THE UNITED STATES

AUGUST 4, 1999

Mr. MACK (for himself, Mr. ABRAHAM, Mr. ALLARD, Mr. BENNETT, Mr.

BROWNBACK, Mr. HAGEL, Mr. HELMS, and Mr. SHELBY) introduced the

following bill; which was read twice and referred to the Committee on

Banking, Housing, and Urban Affairs

A BILL

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.

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 1999’’.
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1 SEC. 2. FINDINGS; STATEMENT OF POLICY.

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

3 (1) during periods of inflation, the United

4 States has experienced a deterioration in its poten5 tial economic growth;

6 (2) a decline in inflation has been a crucial fac7 tor in encouraging recent robust economic growth;

8 (3) stable prices facilitate higher sustainable

9 levels of economic growth, investment, and job cre10 ation;

11 (4) the multiple policy goals of the Full Em12 ployment and Balanced Growth Act of 1978 cause

13 confusion and ambiguity about the appropriate role

14 and aims of monetary policy, which can add to vola15 tility in economic activity and financial markets,

16 harming economic growth and costing workers jobs;

17 (5) recognizing the dangers of inflation and the

18 appropriate role of monetary policy, political leaders

19 in countries throughout the world have directed the

20 central banks of those countries to institute reforms

21 that focus monetary policy on the single objective of

22 price stability, rather than on multiple policy goals;

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

24 the proper role of the Board of Governors of the

25 Federal Reserve System in economic policymaking,
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1 in order to achieve the best environment for long2 term economic growth and job creation; and

3 (7) because price stability is a key condition for

4 maintaining the highest possible levels of produc5 tivity, real incomes, living standards, employment,

6 and global competitiveness, price stability should be

7 the primary long-term goal of the Board of Gov8 ernors of the Federal Reserve System.

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

10 United States that—

11 (1) the principal economic responsibilities of the

12 Government are to establish and ensure an environ13 ment that is conducive to both long-term economic

14 growth and increases in living standards, by estab15 lishing and maintaining free markets, low taxes, re16 spect for private property, and the stable, long-term

17 purchasing power of the United States currency; and

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

19 Governors of the Federal Reserve System (hereafter

20 in this Act referred to as the ‘‘Board’’) should be to

21 promote price stability.

22 SEC. 3. MONETARY POLICY.

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

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

25 is amended to read as follows:
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1 ‘‘SEC. 2A. MONETARY POLICY.

2 ‘‘(a) PRICE STABILITY.—The Board and the Federal

3 Open Market Committee (hereafter in this section referred

4 to as the ‘Committee’) shall—

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

6 the term ‘price stability’; and

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

8 promotes long-term price stability.

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

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

11 shall consult with the Congress at semiannual hearings be12 fore the Committee on Banking, Housing, and Urban Af13 fairs of the Senate and the Committee on Banking and

14 Financial Services of the House of Representatives, about

15 the objectives and plans of the Board and the Committee

16 with respect to achieving and maintaining price stability.

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

18 shall, concurrent with each semiannual hearing required

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

20 containing—

21 ‘‘(1) numerical measures to help assess the ex22 tent to which the Board and the Committee are

23 achieving and maintaining price stability in accord24 ance with subsection (a);
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1 ‘‘(2) a description of the intermediate variables

2 used by the Board to gauge the prospects for achiev3 ing the objective of price stability; and

4 ‘‘(3) the definition, or any modifications there5 to, of ‘price stability’ established in accordance with

6 subsection (a)(1).’’.

7 (b) COMPLIANCE ESTIMATE.—

8 (1) IN GENERAL.—Concurrent with the first

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

10 Federal Reserve Act (as amended by subsection (a)

11 of this section) following the date of enactment of

12 this Act, the Board shall submit to the Congress a

13 written estimate of the length of time it will take for

14 the Board and the Committee to fully achieve price

15 stability. The Board and the Committee shall take

16 into account any potential short-term effects on em17 ployment and output in complying with the goal of

18 price stability.

19 (2) DEFINITIONS.—For purposes of this

20 section—

21 (A) the term ‘‘Board’’ means the Board of

22 Governors of the Federal Reserve System; and

23 (B) the term ‘‘Committee’’ means the Fed24 eral Open Market Committee.
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1 SEC. 4. REPEAL OF OBSOLETE PROVISIONS.

2 (a) FULL EMPLOYMENT AND BALANCED GROWTH

3 ACT OF 1978.—The Full Employment and Balanced

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

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

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

7 (1) in section 3 (15 U.S.C. 1022)—

8 (A) in the section heading, by striking

9 ‘‘AND SHORT-TERM ECONOMIC GOALS AND

10 POLICIES’’;

11 (B) by striking ‘‘(a)’’; and

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

13 11(c) of this Act’’ and all that follows through

14 the end of the section and inserting ‘‘in accord15 ance with section 5(c).’’;

16 (2) in section 9(b) (15 U.S.C. 1022f(b)), by

17 striking ‘‘, the Full Employment and Balanced

18 Growth Act of 1978,’’;

19 (3) in section 10 (15 U.S.C. 1023)—

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

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

22 (B) in subsection (e)(1), by striking ‘‘sec23 tion 9’’ and inserting ‘‘section 3’’; and

24 (C) in the matter immediately following

25 paragraph (2) of subsection (e), by striking
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1 ‘‘and the Full Employment and Balanced

2 Growth Act of 1978’’;

3 (4) by striking section 2;

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

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

6 as sections 2 through 5, respectively.

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

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

9 631 et seq.) is amended—

10 (1) in section 301—

11 (A) in subsection (b), by striking para12 graph (1) and redesignating paragraphs (2)

13 through (9) as paragraphs (1) through (8), re14 spectively;

15 (B) in subsection (d), in the second sen16 tence, by striking ‘‘the fiscal policy’’ and all

17 that follows through the end of the sentence

18 and inserting ‘‘fiscal policy.’’;

19 (C) in subsection (e)(1), in the second sen20 tence, by striking ‘‘as to short-term and me21 dium-term goals’’; and

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

23 the following:

24 ‘‘(f) [Reserved.]’’; and

25 (2) in section 305—
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1 (A) in subsection (a)(3), by inserting be2 fore the period at the end ‘‘, as described in

3 section 2 of the Economic Growth and Price

4 Stability Act of 1999’’;

5 (B) in subsection (a)(4)—

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

7 economic goals’’ and all that follows

8 through ‘‘designed to achieve,’’ and insert9 ing ‘‘House of Representatives sets forth

10 the economic goals and policies, as de11 scribed in section 2 of the Economic

12 Growth and Price Stability Act of 1999,’’;

13 and

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

15 that follows through the end of the para16 graph and inserting ‘‘such goals and poli17 cies.’’;

18 (C) in subsection (b)(3), by inserting be19 fore the period at the end ‘‘, as described in

20 section 2 of the Economic Growth and Price

21 Stability Act of 1999’’; and

22 (D) in subsection (b)(4)—

23 (i) by striking ‘‘goals (as’’ and all that

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

25 inserting ‘‘goals and policies, as described
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1 in section 2 of the Economic Growth and

2 Price Stability Act of 1999,’’; and

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

4 that follows through the end of the para5 graph and inserting ‘‘such goals and poli6 cies.’’.

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