Independence and Accountability

   Question: Can an independent government agency maintain independence even as it yields to increasing demands for accountability?
   That can be a tough one. Can the Federal Reserve, for example, keep its independence as the nation's central bank with major responsibility for encouraging economic growth, yet be fully accountable to Congress for what it does? And does accountability reduce its independence? More important, perhaps, where is the balance between the two?

   The Fed is supposed to have a free hand in setting monetary policy  to influence economic growth and control inflation. But when an increasingly partisan Congress pushes legislation demanding explanations and detailed accountability for Fed actions, that can easily diminish the Fed's independence.
   Republicans in the House of Representatives are pushing a bill that would require the Fed to set rules on when and how it would take action on, for example, inflation. Fed Chair Janet Yellen told a House committee that such a requirement would limit the central bank's flexibility. Republicans maintained that the legislation would not specify the quality of the rule, only that such a rule be set. The Fed would be able to change the rule, they said, but meanwhile, there would be increasing transparency into what the Fed does and how it does it.
  So there's the puzzle. How much transparency should there be in the operation of an agency that, by its nature, needs to be flexible as it operates behind the financial and economic scene?
   
   Meanwhile, the U.S. economy seems to be recovering, although not as swiftly or as strongly as many would like. In the Fed's so-called Beige Book outlining economic conditions throughout the country, the central bank said today that all twelve regions in the Federal Reserve system have shown modest to moderate growth recently.
   Separately, the Census Bureau reported business inventories were up 0.5 percent, and sales were up 0.4 percent. The nation added 288,000 jobs in June, and the unemployment rate faded to 6.1 percent. The Commerce Department reported the exports of goods and services over the past five years have increased 45.7 percent, and the international trade deficit has been reduced.