I was glad to see Ron Paul tell Tim Fernholz that the recent conservative crusade to end the Federal Reserve’s dual mandate is “a little bit of grandstanding.”
One thing that the media really ought to ask of the folks pushing this idea is what difference they think it would make in the current circumstances. Just run back the tape of 2008–2010 with a single mandate for price stability. What’s happened during this period is that inflation has been unusually low. And in the Fed’s latest round of economic forecasts they went from predicting future inflation that would be at the low end of the normal range to inflation that would be below the normal range. So given an inflation-only mandate, the right solution would be expansionary monetary policy. And given an inflation-and-unemployment mandate, the right solution is expansionary monetary policy.
The only policy judgment that would make a difference is if you decided that in the 1984–2006 period America was suffering from ruinously high inflation and therefore the Fed should deliberately seek to have a lower inflation rate in the future. My objection to that would be that such a policy would lead to needlessly high unemployment and elevated risks of deflation. But this isn’t a debate about the nature of the Fed’s mandate, it’s a debate about whether or not we had ruinous inflation in the 1984–2006 period. Does Jim DeMint think we did?