Page 89 - TrumpsEconEra_Flat

Trump’s Economic Era

employment. We cannot have zero percent
unemployment because someone is always looking for
work. The Bureau of Labor Statistics considers the
economy fully employed when 4 to 6 percent of the
labor force is seeking employment.
The Full Employment Act of 1946 mandates the
federal government to predict the employment rate for
the next fiscal year. Congress must submit a full
employment policy if the projected rate is less than full
employment.

A change came in 1978 with the passage of the
Full Employment and Balanced Growth Act, also
known as the Humphrey-Hawkins Full Employment
Act. With this act, Congress put mandates on the Fed to
ensure both price stability and full employment.

Austrians object to this dual mandate because the
cure for inflation is to reduce the money supply, and the
solution for unemployment is to increase the money
supply. However, the Fed cannot fight both problems
simultaneously when we experience stagflation, as we
did in the 1970’s. Austrians call this a “feel good
policy” because it sounds good, but it can defy the rules
of economics.
At times, the Fed has admitted that its policies are
counterproductive, but the law forced it to do
something. The Fed is effective at fighting inflation
because when it decreases the money supply, people
have no choice but to spend less. However, the Fed
cannot force people to borrow money, which limits
monetary policies when unemployment is the problem.
Austrians support ending this dual mandate and favor
liberating the central bank to focus on stabilizing prices.

-88-