The Fed is too powerful on account of Congress’s failure to do its job in our constitutional order.

I get where Charlie is coming from on the constitutionality of the Fed. It feels like another case of substituting a desired policy for what the Constitution says, a move we’re used to seeing on the left and one that originalism is meant to oppose. He writes, “In essence, Dominic’s argument is the one that, in most other areas, conservatives such as he tend to dislike: Namely, that the enumerated powers that the Constitution accords to the federal government create a set of implied powers, and that determining where those implied powers end is too tough a task for mere mortals.”

That can be a problem, but here it is Charlie who argues for implied powers based on enumerated ones. The president’s power to fire executive branch officers appears nowhere in the text of the Constitution. It is implied from the president’s authority in the vesting clause of Article II, Section 1, and the take-care clause of Article II, Section 3. I think that inference is reasonable, but it is an implied power, not an enumerated power.

The constitutional case for the Federal Reserve doesn’t come from the New Deal era or Earl Warren or Laurence Tribe. As I wrote in my post, it comes from John Marshall, in McCulloch v. Maryland, one of the most celebrated Supreme Court cases and the bedrock of our legal understanding of the limits of federal power.

Based on the Supreme Court’s words in that decision from 1819 — 18 years before the phrase “living constitution” was even invented — I wrote:

It is a legitimate end for Congress to want to control inflation and ensure a stable banking system so it can effectively carry out its enumerated powers of taxing, borrowing, spending, and issuing money. It created the Federal Reserve as an appropriate means to that end. The Constitution does not explicitly prohibit the creation of the Federal Reserve. Therefore, it is constitutional for Congress to have created it.

Charlie retorts, “I find those last two sentences chilling.” I do too! That’s why the first two sentences are vital, as Marshall recognized. He wasn’t saying that everything that isn’t prohibited is allowed. He was saying that Congress must be pursuing a legitimate end based on its enumerated powers, and the means to that end must be appropriate and consistent with the Constitution. I think having a stable monetary system is a legitimate end, and that creating an independent central bank is an appropriate way to do that.

Charlie quotes Alexander Hamilton and James Madison to back up the claim that “the logic of the American system is not that the federal government may do absolutely anything unless the Constitution says it may not.” I agree with them, and with Charlie, on that general principle. But they disagreed with each other on whether Congress could charter a national bank. Hamilton said yes, and Madison said no. It’s just not a clear-cut issue.

It’s also not as much of a departure from conservative critiques related to the separation of powers as Charlie makes it out to be. One of the big problems with the Fed is a problem that conservatives talk about all the time: Congress has given away too much of its power and become apathetic.

In McCulloch v. Maryland, the Supreme Court also said, “If a certain means to carry into effect of any of the powers expressly given by the Constitution to the Government of the Union be an appropriate measure, not prohibited by the Constitution, the degree of its necessity is a question of legislative discretion, not of judicial cognizance.”

That finding is based, as Andy wrote in his post, on the necessary-and-proper clause at the end of Article I, Section 8. That is a power of Congress, not the courts. And Congress has failed to exercise this power wisely with respect to the Federal Reserve.

Since the 2008 financial crisis, Congress has given the Fed far more power than it ever had before. On regulatory matters, it gave away vast amounts of power in Dodd-Frank. And on monetary policy, it has refused to exercise its power to more narrowly define the Fed’s mandate.

As John Cochrane wrote on his blog:

Congress wrote “price stability” decades ago. The Fed slowly interpreted this to mean 2% inflation, then 2% inflation and we forget about mistakes, then the asymmetric complex FAIT, and now a new framework. Congress’ silence is its acquiescence. Every time Powell went to Congress, legislators could have said “price stability means price stability!” They did not.

That silence has also resulted in the Fed expanding into climate policy, DEI, and a whole bunch of other stuff that isn’t really about price stability and full employment, the dual mandate that Congress gave. The Fed should not be able to do that on its own, but the correct constitutional check is not to somehow rule that the Fed is itself invalid. It is for Congress to man up and pass a bill better defining the Fed’s mandate.

I’d like to see the dual mandate shorn to a singular focus on price stability, preferably governed by a monetary policy rule rather than the discretion of the FOMC. In a world where that happened, the Fed would be less of a political flashpoint because it wouldn’t have as much power in general, and the individuals in charge of it wouldn’t matter as much because they would be more constrained in their decision-making. Any constitutional question that would arise would be lower-stakes.

Part of the reason the constitutionality question has come up in a significant way is that the Fed is too powerful on account of Congress’s failure to do its job in our constitutional order. That’s perfectly consistent with other conservative legal critiques, and restoring a better constitutional balance does not require eliminating the entire thing.