Donald Trump’s choice of Mike Pence for vice president is a promising pick for those of us who see a restoration of sound money as the essential precondition for returning America’s economy to a trajectory of jobs and growth. No doubt he has lots of other virtues, in that he has experience and success as both a congressman and governor. Were he ever called to the presidency, he would be prepared. But the feature of his political agenda that we have been watching for years is that in respect of monetary reform.
This point was marked in these columns in January 2011, after Mr. Pence, then a congressman from Indiana and chairman of the House Republican Conference, addressed the Detroit Economic Club. He did not come right out and declare for the gold standard. But he did make it clear that he understood that the time for monetary reform had arrived. “What are the building blocks of an incentive-based, growth agenda?” he asked. The first of his five building blocks was “sound monetary policy.
That, to us, was significant. Mr. Pence’s other four building blocks were terrific, too, including, as they did, “tax relief and reform, access to American energy, regulatory reform, and trade.” It was particularly newsworthy, we felt, that he had marked monetary first and that he was at the van of the leading Republicans on this head. He quoted Lawrence Kudlow’s line about how “the Fed can print money, but it can’t print jobs.” We’d like to think that it’s no coincidence that Mr. Kudlow is advising Mr. Trump (as he did President Reagan).
Mr. Trump himself has already stated that, in principle, he favors sound money. “Bringing back the gold standard would be very hard to do, but, boy, would it be wonderful,” he’s said. “We’d have a standard on which to base our money.” The comment horrified the liberal nomenklatura, a quick Google search discloses. “Why are Republicans so obsessed with the gold standard?” is the way it was put in one Atlantic.com headline that was turned up by such a search. It ignored the plain answer.
That is that we are now in the fifth decade of the age of fiat money, and it has produced a presidency that, in Barack Obama’s, has average growth of under 2%. And has been able to reduce the unemployment rate only by so discouraging millions of would-be American workers that they have withdrawn from the search for employment. Yet in the years between the end of World War II and 1971, when the world was on the Bretton Woods gold-exchange standard, unemployment averaged 4.7%.
Though Governor Pence did not, in his speech in 2010, call for a return to a gold standard, he did call for one immediate reform — ending the so-called dual mandate of the Federal Reserve so that it would no longer be saddled with responsibility for unemployment and could focus on the dollar and price stability. He understood how alive the issue is in Congress, where the House late last year passed the Fed Oversight Reform and Modernization Act.
In 2012, of course, the GOP failed to turn to Mr. Pence. Instead it nominated Governor Romney. It did give him a platform that included monetary reform, but he ignored it and went down to defeat. This year, we’re told, the GOP platform includes even better language in support of a formal monetary commission. That would open the way to reforming monetary policy as we start the second century of the Federal Reserve. It makes Mr. Pence, now that Mr. Trump has picked him, prescient.
This column, in slightly different form, first ran in the New York Sun.
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