Toomey Criticizes Omarova’s Plan to Have Federal Government Set Price Controls
“If you’re someone who thinks the Fed has done a lousy job controlling inflation today, just wait until they start controlling prices, too”
Washington, D.C. – U.S. Senate Banking Committee Ranking Member Pat Toomey (R-Pa.) spoke on the floor of the U.S. Senate today to raise concerns over the plan of Saule Omarova—President Biden’s pick for the Comptroller of the Currency—to have the federal government set price controls for large sectors of the U.S. economy, including food, gas, wages, and home prices.
Ranking
Member Toomey’s full remarks, as prepared for delivery:
Mr.
President, I rise to discuss President Biden’s nominee to serve as one of our
nation’s chief banking regulators.
Almost
a month ago, President Biden announced his intent to nominate Cornell University
law professor Saule Omarova to serve as Comptroller of the Currency. Recently,
I spoke on the Senate floor about her nomination. I noted that she’s been
celebrated on the far left for promoting ideas she herself has described as
“radical.”
These
are very, very radical ideas that demonstrate a clear aversion to America’s
free enterprise system, which has produced an incredible level of prosperity
and standard of living. In fact, I don’t think I’ve ever seen a more radical
choice for any regulatory spot in our federal government. That assessment is
based on the things Professor Omarova has written and said in her own
words—often quite recently.
Today,
I want to focus on one of the radical ideas that she laid out in a 2016 paper.
It’s her plan to have the federal government set wages and prices for large
sectors of the U.S. economy.
Under
her plan, the federal government would designate “systemically important prices
and indexes,” or “SIPIs,” for the Federal Reserve to regulate. She details five
approaches to regulating systemically important prices.
While
they are all problematic, one is particularly troubling. Professor Omarova
argues that: “The … final regulatory option we think worth considering is …
price maintenance—typically within some band—through OMOs.”
OMOs
refers to Federal Reserve Open Market Operations. The Fed uses OMOs to purchase
and sell a limited range of securities in the open market to implement monetary
policy. What Professor Omarova is advocating for is a radical departure from
this limited activity.
Her
plan would empower the Fed “to buy and sell in markets…with a view to keeping
particular [systemically important prices] within particular bands thought
necessary for the purposes of maintaining systemic stability.”
What
prices would Professor Omarova have the Fed set? She says: “Various candidate
SIPIs here come to mind. . . . Certain sensitive commodity prices—those for
widely used fuels, foodstuffs, and some other raw materials, for
example—constitute another class of candidates. Finally, wage or salary indices
constitute yet another class of candidates.” Her other candidates for price
controls include “home prices” and “productive inputs” such as “energy,”
“certain . . . metals, and other natural resources.”
Under
Professor Omarova’s radical plan, the government would replace the free market
in how wages and prices are set. The government would control everything from
the size of your paycheck to the amount you pay at the grocery store and the
gas station.
If
her radical idea sounds familiar, that’s because it is. It’s been tried—and
failed spectacularly—time and again in centrally planned economies, like the
Soviet Union. In fact, Soviet efforts to control prices and the economy were so
abysmal that they spawned countless jokes within the USSR that illustrate the
folly of central planning.
One
of my favorites is about a man who walks into a store. He asks the shopkeeper:
“You don't have any meat, do you?” The shopkeeper replies: “No, we don't have
any fish. The store next door is the one that doesn't have any meat.”
While
we can laugh at this joke now, the pain and suffering caused to real people by
the Soviet Union’s shortage of food and necessities caused by central planning
is no laughing matter. Government-run economies like the one Professor Omarova
proposed don’t work.
And
let me repeat a point I’ve made before about Professor Omarova. The fact that
she was born and raised in the Soviet Union in no way affects whether the
Senate should confirm her to run a major federal financial agency. But her
advocacy for policies that resemble the Soviet Union’s economic policies
absolutely affects that decision.
Professor
Omarova would likely argue that her centrally planned economy would be
different. As her paper notes, the Fed does already use Open Market Operations
to implement monetary policy.
So
why not let the Fed use a similar mechanism to set and maintain stable prices
for important assets? The answer is simple: Making decisions about what
individual assets across the economy should cost is a dramatically different
endeavor, which no government technocrat can do as well as a market can.
In
addition, the government technocrats at the Fed get monetary policy wrong so
often we should not be seeking to expand their mission. If you’re someone who
thinks the Fed has done a lousy job controlling inflation today, just wait
until they start “controlling” prices, too.
The
more I read the radical ideas that Professor Omarova has advocated for and
consider the enormously harmful effects they would have on our economy, the
more troubled I am by her nomination. I strongly urge President Biden to
reconsider his decision to nominate her.
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