Independence Under Threat: Assessing Political Pressure on the Federal Reserve

Abstract

This paper seeks to assess the political pressure that the Federal Reserve faces from both the Executive and Legislative Branches of government on its institutions of independence. This analysis includes decades of quantitative data and is supplemented by interviews with two former members of the Fed Board of Governors. Using the guide of Boettke and Smith (2013) that maps a history of political influence on the Fed and employing the timeframe model of Abrams and Iossifov (2006), this paper finds that President Trump increased pressure on the Fed beginning in the 2019 Presidential Election Cycle through Fed appointments and media communications. Then, this paper builds on the Crisis, Blame, and Reform cycle of Binder and Spindel (2017) by expanding their model. This includes stronger evidence that the public blames the Fed in times of economic crisis, and that Congress in turn scapegoats the Fed through oversight and audit bill proposals.