Should Congress require the Federal Reserve to take racial disparities into account when making decisions?
This bill would create a racial justice mission at the Fed to eliminate racial and economic disparities in all of its work. Any decision made by the Fed about the economy of the country would need to work in a way that minimizes and eliminates racial disparities in employment, wages, wealth, and access to affordable credit for everyone. It would also require the Federal Reserve to report racial disparities to Congress and report on its plan to reduce the disparities.
Sponsor: Rep, Waters, Maxine (Democrat, California, District 43)
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Opponents say
• "Subjecting monetary policymakers to the task of eliminating economic disparities across racial and ethnic groups would further politicize the Fed, undermine its credibility, and clash with the ideal of equal treatment under the law. Having unelected policymakers at the Fed draw the line between what is just and unjust with regard to economic outcomes would risk undermining the market price and profit system, which has been the main engine for reducing poverty." Source: James A. Dorn, CATO Institute
• "The most important thing the Fed can do to help improve living standards for all people is to ensure the monetary policy is aimed at preventing monetary disturbances that cause inflation and severe recessions, both of which undermine markets and the price system’s ability to allocate resources efficiently. Meanwhile, Congress needs to rethink failed policies that restrict freedom of choice; it also should control spending, reduce onerous taxes, and respect the demarcation between fiscal and monetary policy. " Source: James A. Dorn, CATO Institute
Proponents say
• "The Federal Reserve Racial and Economic Equity Act will help ensure that the Fed plays a role in addressing inequality by creating a new racial justice mission at the Fed to eliminate racial and economic disparities in all of its work. This legislation builds on recent work by the Fed to ensure there is a robust data published on racial economic disparities when they testify before Congress so that we can better monitor and close these gaps to ensure our economy provides prosperity for all." Source: Rep. Maxine Walters, Press release
• "The results of this analysis highlight some potential benefits of creating an economy in which people of all races and ethnicities can participate fully, access the same opportunities and maximize the utility of their skills and credentials. Eliminating labor market gaps between racial and ethnic groups could have an important impact on GDP. Over the 30-year period from 1990 to 2019, the counterfactual exercise pointed to $25.6 trillion in GDP gains from additional labor earnings … This work shows that reducing inequities could contribute to widespread economic growth." Source: Federal Reserve Bank of St. Louis
• "The persistence of systemic disparities is costly, and eliminating them has the potential to produce large economic gains." Source: Brookings
- Ranking Member Waters, Senator Warren Reintroduce Bill Requiring the Fed to Close Racial Employment & Wage Gaps (Press Release)
- Racial Equity Could Produce Widespread Economic Gains (Federal Reserve Bank of St. Louis)
- Racial Equity is Beyond the Fed’s Scope (CATO Institute)
- Rep. Maxine Waters Open Secrets Page
