tionary spending, regulatory intervention, or measures to improve equity in the distribution of national income and wealth. With the federal fiscal policy on automatic pilot, the Fed's monetary policy could be removed entirely from the inefficiencies and confusion of the democratic process. But this deceptively simple conception poses profound questions for the process of democratic representative government in the United States as it pertains to managing the nation's economy. Federal Reserve independence has a direct impact on the daily lives of most Americans in their "pursuit of happiness," of which their economic welfare is a major element. Since World War II, the Federal Reserve, together with policy makers on Capitol Hill and the White House, gradually worked out strategies for achieving a balance between tolerable rates of unemployment and inflation. The government was determined to prevent the recurrence of the kind of massive unemployment suffered in the Depression of the 1930s. In 1944, President Franklin Roosevelt set forth the basis for his postwar domestic program in an "Economic Bill of Rights." His number one priority was "the right to a useful and remunerative job." Congress soon passed the historic Employment Act of 1946 with strong Democratic and Republican support. It gave the federal government explicit responsibility to promote "maximum employment, production, and purchasing power." (This was subsequently amended and strengthened in the Full Employment and Balanced Growth Act of 1978.) In the 1950s and 1960s, both Republican and Democratic administrations pursued the generally accepted goals of full employment, sustainable growth, and minimal inflation. Economic managers shifted weight among the several objectives as the economy moved up and down over the business cycle. During those decades, American economists in the mainstream shared a broad consensus that backed counter cyclical policy aimed at a mix of full...
