Pound for pound, President Biden has raised taxes for middle-class Americans more than any president in recent decades. The rates largely have stayed the same, but between deficit spending and policy at the Federal Reserve, Washington has created a massive hidden tax through rampant inflation. The high prices you find at the supermarket, gas station, and online in large part can be attributed to the accumulation of the Federal Reserve’s power and influence. Since 2008, the Fed has grown to the power of a new branch of government — one that is both unelected and poorly managed. Reckless monetary policy has given us the worst inflation in 40 years, and likely a looming recession.            

The Federal Reserve has accumulated immense powers since its inception in 1913. A response to economic panics, the national bank could allow for a chance to stabilize interest rates and provide assets for banks. However, the Fed’s failures in 1929, the 1970s, 2008 and 2022 show why our third national bank should go the way of the first two. Instead, following every major monetary failure since the Great Depression, the Fed has only grown in size and importance. 

The Fed offers a convenient avenue for politicians. Its massive overprinting of funds and acquisition of assets enables the worst in our modern fiscal policy by allowing deficit spending on massive levels. Politicians in both parties have utilized the Fed in a way it was not intended: as a fourth branch of government that could circumvent normal budgetary processes and offer quick, seemingly painless solutions. 

Since the beginning of the pandemic, the overall money supply circulating through the economy has increased by 40 percent. During the same time period, the overall dollars increased from just under $15.5 trillion to about $22 trillion, while the total assets held by the Fed more than doubled from $4.2 trillion to more than $9 trillion. This is 10 times the pre-2008 level of holdings and more than quadruple the level during the start of the Great Recession. Meanwhile, Congress operated with a massive $3.1 trillion budget deficit in 2021. All these factors, notwithstanding supply chain and international factors, drove up inflation to near Carter administration-level heights. 

The asset purchases of the past two and a half years betray the original purpose of the country’s central bank. Rather than allowing for the printing of physical dollars (which is risky enough) and the setting of interest rates, the Fed is a behemoth that holds assets valued at nearly half the national economy. It doesn’t have a budget set by Congress and makes decisions formally separate from our elected leaders. This quasi-governmental role allows it to act as a tool for politicians to expand government, via deficit spending with printed dollars, while sidestepping traditional processes. Congress didn’t approve the major stimulus of purchasing bonds and other assets by the central bank but happily spent from the money it created. For years this system has allowed for massive federal spending binges and borrowing “in house,” while even offering a small surplus returned to the federal budget. 

Since 2020, the Fed sought to avert a depression but instead may have given us the “perfect storm” to enter in one. To prevent worsening inflation and teetering economic numbers, there is a desperate need for drastic reform. The current moment is an opportunity to solve one of the key drivers of global economic decline. While the political odds of completely repealing the 1913 Federal Reserve Act is effectively zero, a GOP-led White House and Congress could craft significant oversights over the institution. The last time the topic of auditing the Fed was broached in a public poll, more than 80 percent of Americans backed the idea. Other reforms should be implemented to avoid future abuses of the Fed, including limiting asset purchases or holding the current Federal Reserve Governors accountable during their affixed terms.

Biden is not the person to fix the Fed’s broken policies. The president has utilized the central bank as a means to bankroll massive spending, creating a situation where too many dollars are chasing too few goods. Putting an end to inflation will take a strong leader who is willing to cut spending drastically, and to put an end to massive deficit spending, printing and borrowing. A constitutionally-minded president should prioritize limits on the Fed’s power through aggressive means before it consumes us all.

To be sure, ending inflation today will be just as difficult as it was in 1981. But temporary economic harm may be necessary to reset the economy back into working order. However, the ability to do so will be just as simple as it was then; stopping the massive overprinting of money and purchasing of assets can be done with a push of a button — literally. Politicians believed that the cold, hard laws of economics could be defied via the Federal Reserve. As it turns out, putting off hard decisions and offering easy answers has only made the problem worse. 

Given the track record of politicians from both parties, the likelihood of reforming the Fed before our economic woes get significantly worse is not great. However, just as France found out in 1788-1789, such a broken banking system and public debt is unsustainable. And unless someone stops the game of musical chairs, when the song stops, it will make 2008 look like child’s play.

Don’t say no one warned you.