In a Wall Street Journal op-ed, former Treasury Secretary and Secretary of State James Baker III says that Republican electoral success in 2022 and 2024 will be enhanced if candidates focus on the core conservative principles of fiscal responsibility and economic growth.  (Focus on Principle, Not Personality, for a Bright GOP Future, 6/7/2021) I concur. Nonetheless, I believe Mr. Baker left out at least one very important economic principle that should be a part of conservative and Republican advocacy. That principle is sound money.

To add my view to the discussion, I submitted a Letter to the Editor, which the Journal published today (June 12, print edition). (“GOP Must Articulate and Sell a Better Vision”) To fit within word count limits, the Journal shortened my submission. I reproduce the unshortened version directly below.

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Former Secretary of State James Baker is correct when he states that the key to Republican success in 2022 and 2024 is to focus on core conservative economic principles such as fiscal responsibility and policies promoting economic growth.  (Focus on Principle, Not Personality, for a Bright GOP Future, 6/7/2021)  I would add another conservative economic principle that regrettably has been neglected too long by Republicans but would also resonate with voters, sound money.  Especially as fear of inflation grows and likely materializes before the next election, advocacy of sound money will be a winning issue.  In 1978 Congress gave the Fed a duel mandate, price stability and full employment, but left it up to the Fed to define the contours of those goals.  Since that time, inflation has averaged 3.33% a year, and the purchasing power of today’s dollar is only 24% of the 1978 dollar (based on BLS statistics).  In addition, since 2012 the Fed has targeted an annual inflation rate of 2% — though because it has been unsuccessful in this effort, now desires to run inflation above 2% in order to make up for lost ground.  All of this Fed-defined “price stability” is grounded in the dubious theory that inflation spurs spending, which leads to a growing nominal GDP, which in turn encourages employment.  The Fed also asserts that inflation gives it more interest rate wiggle room to fight downturns.

I have little doubt that, were it possible to poll Americans, they would overwhelmingly reject having the purchasing power of their income and savings diminished by deliberate policy, a policy that furthermore undercuts the conservative value of personal fiscal prudence.  Republican candidates should aggressively make sound money a campaign issue.  This does not mean running on a platform to politicize the Fed, nor should it.  Candidates need only advocate that Congress update the 1978 legislation with a more precise definition of price stability, specifically one that conforms with the common sense meaning of the term.  Adding sound money to Secretary Baker’s list of economic principles will be a winning move.

Theodore A. Gebhard