I
105TH CONGRESS
1ST SESSION
H. R. 1396
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 Employ-
ment and Balanced Growth Act of 1978, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
APRIL 17, 1997
Mr. SAXTON (for himself, Mr. SMITH of Michigan, Mr. KOLBE, Mr. PETER-
SON of Pennsylvania, and Mr. GRAHAM) introduced the following bill;
which was referred to the Committee on Banking and Financial Services,
and in addition to the Committees on Education and the Workforce 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 juris-
diction of the committee concerned
A BILL
To require the Board of Governors of the Federal Reserve
System to focus on price stability in establishing mone-
tary 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 pur-
poses.
Be it enacted by the Senate and House of Representa-
tives 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 1997’’.
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 dimin-
ished 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 con-
tinue 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 eco-
nomic activity and financial markets, costing work-
ers 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 inter-
est 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 productiv-
ity, 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 environ-
ment that is conducive to both long-term economic
growth and increases in living standards, by estab-
lishing and maintaining free markets, low taxes, re-
spect 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 re-
ferred 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 be-
fore the Committee on Banking, Housing, and Urban Af-
fairs 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 ex-
tent to which the Board and the Committee are
achieving and maintaining price stability in accord-
ance with subsection (a);
‘‘(2) a description of the intermediate variables
used by the Board to gauge the prospects for achiev-
ing the objective of price stability; and
‘‘(3) the definition, or any modifications there-
to, 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 accord-
ance with section 5(c).’’;
(2) in section 9(b), by striking ‘‘, the Full Em-
ployment 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 ‘‘sec-
tion 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 para-
graph (1) and redesignating paragraphs (2)
through (8) as paragraphs (1) through (7), re-
spectively;
(B) in subsection (d), in the second sen-
tence, by striking ‘‘the fiscal policy’’ and all
that follows through the end of the sentence
and inserting ‘‘fiscal policy.’’;