The key players in economic policy making 547struggling because of low wages, underemployment or unemployment and lack of
opportunities. And loosening the rules for some of the country’s largest banks isn’t
the way to solve these problems.”^27 If the Fed moves in that direction, voters can do
nothing about it.
But the Fed is not immune to political influence. In fact, one line of research argues
that the Fed tries to help presidents during reelection years by encouraging a pro-
growth economy.^28 Evidence on this point is mixed, but at a minimum presidents do
have the ability to make it clear when they disagree with the Fed’s policies. Presidents
also have the opportunity to appoint the chair and vice-chair of the Fed, but presidents
usually go for continuity over change because they do not want to upset the financial
markets. Other research has shown that the Fed is at least somewhat sensitive to the
preferences of the president and Congress, who may publicly criticize the Fed when
they disagree with its policies.^29
The Fed’s ultimate accountability is to Congress, because if things really got out of
hand—for example, if the Fed decided to increase interest rates to 20 percent without
good reason—Congress could amend the Federal Reserve Act and remove the Fed’s
responsibility or autonomy in specific areas. The Fed must report to Congress annually
on its activities and to the banking committees of Congress twice a year on its plans for
monetary policy. The Fed’s annual report is subject to an outside audit. Fed officials also
frequently testify before Congress on a broad range of issues.The Treasury Department The Treasury Department is another part of the
bureaucracy that plays an important role in economic policy making. According to its
website, the mission of the Treasury “is to promote the conditions for prosperity and
stability in the United States and encourage prosperity and stability in the rest of the
world.” Specifically, the range of its responsibilities related to economic policy making
includes:- managing federal finances;
- collecting taxes, duties, and monies paid to and due to the United States and paying
all bills of the United States; - producing currency and coinage;
Though the Fed’s monetary policy
is always aimed at stabilizing the
economy and fostering steady
growth, markets can still have adverse
reactions. When the Fed announced
that it would raise interest rates in
June 2018, the Dow Jones Industrial
Average dropped 119 points at the
day’s close.Full_16_APT_64431_ch15_530-571.indd 547 15/11/18 2:34 PM