When the President reaches for the central bank

I will confess at the outset that I opposed the original Bank of the United States with a vigor that some of my contemporaries thought excessive. My worry was never merely technical — it was constitutional and republican at its root. A republic that concentrates the power over money in a single institution, and then allows a single magistrate to command that institution, has built a engine of consolidated power that every future ambitious executive will be tempted to drive. The CNBC report tells us that President Trump has made repeated public calls for the Federal Reserve to lower interest rates, and that the Fed responded by unanimously raising them a quarter point. The drama here is not in the basis-points; it is in the confrontation.

Consider what it means when a president treats an interest-rate decision as an act of defiance rather than a professional judgment. According to the CNBC analysis, the question now before the Republic is whether this administration will move to curtail the Fed's independence after the rate hike. I cannot speak to the modern mechanics of central banking with any authority — I was not born into that world. But I can speak to the shape of the civic danger, and the shape is familiar: an executive who regards every independent institution as an obstacle to be removed is not governing a republic; he is auditing one.

I spent the better part of my public life warning against what I called the "paper aristocracy" — men and institutions whose power derived from the control of credit rather than from the labor of their hands or the consent of their neighbors. That warning carries an irony I must not suppress: the remedy for a privately captured currency cannot be an executive-captured one. Trading one master for another is no liberation. If the Federal Reserve is imperfect — and every institution devised by fallible humans will be — the correction must come through law, through Congress, through deliberate public debate, not through presidential pressure campaigns designed to bend professional judgment to electoral convenience.

The public debt is the companion issue, and here my disposition is as strong as ever. Debt incurred today is a tax levied on citizens who have not yet voted, not yet lived, and cannot yet consent. Whether a low interest rate serves the debtor-state in the short run is precisely the kind of reasoning that flatters the moment and plunders the future. I argued in my own time that each generation has the right to govern itself unburdened by the financial obligations of its predecessors. An executive who demands cheap credit to ease the cost of carrying a swollen debt is not practicing fiscal virtue — he is mortgaging the children to comfort the present.

The educated citizen, reading this story, should ask a question that has nothing to do with whether rates should be 4 percent or 5 percent: What happens to republican government when every independent professional body — the judiciary, the military command, the central bank — is expected to reflect the pleasure of the executive? The answer history gives, without exception, is consolidation. Consolidation is the first form of tyranny, and it rarely announces itself. It arrives as efficiency, as loyalty, as the reasonable request that institutions stop being difficult. I conclude where I always conclude: the price of liberty is, in every age, the willingness of citizens to defend institutions they may not love against executives they may admire.