LAS VEGAS -- Just hours before Sen. Rand Paul (R-Ky.) took the stage to address the Las Vegas Economic Club, the Federal Reserve announced the first interest rate increase in nearly seven years. It was the first, actually, of Paul's entire political career. And it was Paul's cue to wave a flag that had been lost in the increasingly foreign policy-focused Republican primary -- the flag of Fed-bashing.
“Is it a good thing or a bad thing to raise the interest rate?” Paul asked. “Well, I’m kind of agnostic on it. It’s kind of like if you ask me: All right, should the Politburo raise the price of bread or lower the price of bread? I like both prices, but the real question should be: Should the government be involved with setting prices? What amazes me about the Federal Reserve setting interest rates is that almost to a person, conservative economists in our country will say, wage and price controls are a mistake.”
Paul's comparison between setting interest rates and setting prices is not one many politicians would make. Most developed, capitalistic nations empower central banks to set interest rates. Few are as devolved as the Federal Reserve, whose members are appointed by the president and confirmed by Congress, but do not answer any further to the executive or legislative branches.
But since the financial crisis of 2008, the Federal Reserve has become a target for some conservative and libertarian-leaning politicians. The Fed is blamed for setting rates that allowed too many people without means to buy up real estate, and further blamed for printing money in rounds of "quantitative easing" in order to boost the economy. In 2011, then-Texas governor Rick Perry told an audience that then-Fed chairman Ben Bernanke would get a "pretty ugly" reception in his state if he showed his face there, furthering the idea that the chairman -- an appointee of former President George W. Bush -- was building an economic bubble to re-elect President Obama.
Paul's criticism of the Fed has been more existential. Sen. Ted Cruz (R-Tex.), who is vying for some of the same libertarian voters as Paul, has suggested that the dollar be tied to gold, wrenching away the Fed's ability to set rates. "I think the Fed should get out of the business of trying to juice our economy, and simply be focused on sound money and monetary stability," said Cruz at CNBC's Republican debate. Paul, whose father Ron Paul has written extensively about the gold standard, has suggested that prices be linked to a basket of commodities.
“Most economists will say, yes, we have to have free prices," said Paul in the Vegas speech. "Yet we very carelessly, I think, allow this power to go [to the Fed]. What happens is the price of money is set, basically, by a Politburo. But just like the price of bread, they have no idea what they're doing. The reason the Soviet Union failed is that it couldn’t come up with something as simple as the price of bread. You could say there are moral reasons for prices, and you wouldn't be an economist. You'd be a politician.”