U.S. Senator Mike Lee has introduced a bill calling for the abolition of the Federal Reserve system, including the board of governors. Dubbed the ‘Abolish Act,’ the proposed law also seeks to repeal the foundational 1913 Federal Reserve Act, which established the federal system.
Also read: There is a little trick to Federal Reserve’s inflation fight
Lee, a Republican senator for Utah, said the U.S. central bank, also known as ‘the Fed,’ “overstepped” its mandate and failed to control key economic variables like inflation and public debt. Lee’s plan received backing in the House of Representatives from Kentucky representative Thomas Massie.
Lee accuses the Fed of ‘economic manipulation’
“The Federal Reserve has repeatedly failed to achieve its mandate and become an economic manipulator that has directly contributed to the financial instability many Americans face today,” Lee said in a statement, adding:
“This legislation aims to protect our economic future by dismantling a system that enables unchecked government spending, the monetization of federal debt that fuels it, and widespread economic disruption.”
Senator Lee declared that “it’s time to end the Fed,” likely in reference to a 2009 book by former Texas Congressman Ron Paul. Ron Paul’s son, Rand Paul, is the current Republican senator for Kentucky, and reportedly a close ally of Lee’s.
I’ve introduced legislation to End the Fed. pic.twitter.com/IGKrB3WKWP
— Mike Lee (@SenMikeLee) June 7, 2024
In the same statement, representative Thomas Massie blamed the Federal Reserve for causing the “suffering” of Americans “under crippling inflation.”
“During COVID, the Federal Reserve created trillions of dollars out of thin air and loaned it to the Treasury Department to enable unprecedented deficit spending,” he said. He further added, “By monetizing the debt, the Fed devalued the dollar and enabled free money policies that caused the high inflation we see today.”
Federal Reserve faces increased scrutiny
The Federal Reserve, which is responsible for inflation and unemployment, is under increasing pressure from lawmakers over the way it has used interest rates to cool prices. According to data from the U.S. Labor Department, year-on-year inflation fell marginally to 3.4% in April from 3.5% a year ago. While this is the first time in 2024 that the year-over-year figure has declined, inflation is still above the Fed’s 2% target.
Prices of goods and services have remained above pre-pandemic levels. However, the central bank has been aggressively raising interest rates since 2022 in a bid to slow down rising prices.
In his Abolition Act, Mike Lee proposes that once the central bank’s board of governors is dissolved, only the chairman may be retained for the sole purpose of facilitating a smooth transition, including paying employee benefits and managing assets and debts. Proceeds from the liquidation of assets will eventually be transferred to the Treasury Department, he said.