SSummary
We support:
- A monetary policy focused primarily on maintaining price stability and financial liquidity
- Limiting the use of monetary policy to support full employment to exceptional circumstances
- Avoiding the prolonged use of artificially low interest rates
- A fiscal policy that offsets the effects of recessions through targeted tax and spending measures
- Maintaining a balanced or near-balanced federal budget during periods of stable economic growth
- Establishing an infrastructure bank consisting of fully vetted projects that can be implemented during economic downturns
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Background
Monetary Policy and the Federal Reserve
The primary role of monetary policy should be the maintenance of price stability and financial liquidity.
While the Federal Reserve has a mandate that includes promoting full employment, we believe that this objective should be pursued cautiously and primarily in periods of significant economic disruption. Expanding the Fed’s role beyond these core responsibilities risks complicating its mission and reducing its effectiveness.
Sustained periods of unusually low interest rates can contribute to financial imbalances and distort investment decisions. Such policies may also reduce returns for savers, particularly those who rely on fixed-income investments.
For these reasons, monetary policy should be applied with a focus on long-term stability rather than short-term stimulus.
Fiscal Policy and Economic Stabilization
In periods of economic crisis—such as severe recessions or disruptions to financial markets—there is an important role for fiscal policy to complement monetary policy.
Government spending and tax policy can help offset declines in aggregate demand that result from reduced consumer and business confidence. When used appropriately, these tools can help stabilize employment and support economic recovery.
However, the effectiveness of fiscal policy depends in part on the government’s fiscal position entering a downturn.
Balanced Budget Policy (Not a Constitutional Amendment)
If the federal government operates with large and persistent deficits during periods of economic stability, its ability to respond effectively during a downturn may be constrained.
Market participants anticipate future policy adjustments, including potential tax increases, spending cuts, or higher interest rates. As a result, stimulus measures implemented in an already highly leveraged fiscal environment may be less effective.
For this reason, we support a policy of maintaining a balanced or near-balanced federal budget during periods of stable economic growth, while allowing for temporary deficits during recessions or periods of war.
We do not believe that a constitutional amendment is a practical or desirable mechanism for enforcing fiscal discipline. Instead, we favor a long-term policy guideline.
As part of this approach, we would support efforts to limit federal spending to approximately 20% of GDP over time, excluding periods of war or declining per capita GDP. We recognize that achieving this target will be challenging given current demographic pressures on programs such as Social Security and Medicare, but believe it represents a reasonable long-term objective.
Infrastructure Investment and an Infrastructure Bank
The United States faces significant infrastructure needs, including in transportation, water systems, and the electric grid.
We support the creation of an infrastructure bank consisting of a standing inventory of fully vetted projects that are ready for implementation. These projects should undergo rigorous public evaluation, including review by independent institutions such as the Congressional Budget Office or the Government Accountability Office.
In periods of economic weakness, this approach would allow for more effective and timely fiscal stimulus by directing spending toward projects with demonstrated long-term value, rather than relying on ad hoc programs that may produce limited or short-lived economic benefits.
We believe that inclusion in such an infrastructure program should be based on merit and cost-effectiveness. It should not be used to favor particular regions, industries, or groups, and should avoid additional requirements that could reduce efficiency or increase costs without corresponding public benefit.
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