U.S. Senate Banking Committee Ranking Member Pat Toomey (R-Pa.) spoke on the floor of the U.S. Senate to raise concerns over the plan of Saule Omarova—President Biden’s pick for the Comptroller of the Currency—to have the federal government set price controls for large sectors of the U.S. economy, including food, gas, wages, and home prices.
Ranking Member Toomey’s full remarks, as prepared for delivery:
Mr. President, I rise to discuss President Biden’s nominee to serve as one of our nation’s chief banking regulators.
Almost a month ago, President Biden announced his intent to nominate Cornell University law professor Saule Omarova to serve as Comptroller of the Currency. Recently, I spoke on the Senate floor about her nomination. I noted that she’s been celebrated on the far left for promoting ideas she herself has described as “radical.”
These are very, very radical ideas that demonstrate a clear aversion to America’s free enterprise system, which has produced an incredible level of prosperity and standard of living. In fact, I don’t think I’ve ever seen a more radical choice for any regulatory spot in our federal government. That assessment is based on the things Professor Omarova has written and said in her own words—often quite recently.
Today, I want to focus on one of the radical ideas that she laid out in a 2016 paper. It’s her plan to have the federal government set wages and prices for large sectors of the U.S. economy.
Under her plan, the federal government would designate “systemically important prices and indexes,” or “SIPIs,” for the Federal Reserve to regulate. She details five approaches to regulating systemically important prices.
While they are all problematic, one is particularly troubling. Professor Omarova argues that: “The … final regulatory option we think worth considering is … price maintenance—typically within some band—through OMOs.”
OMOs refers to Federal Reserve Open Market Operations. The Fed uses OMOs to purchase and sell a limited range of securities in the open market to implement monetary policy. What Professor Omarova is advocating for is a radical departure from this limited activity.
Her plan would empower the Fed “to buy and sell in markets…with a view to keeping particular [systemically important prices] within particular bands thought necessary for the purposes of maintaining systemic stability.”
What prices would Professor Omarova have the Fed set? She says: “Various candidate SIPIs here come to mind. . . . Certain sensitive commodity prices—those for widely used fuels, foodstuffs, and some other raw materials, for example—constitute another class of candidates. Finally, wage or salary indices constitute yet another class of candidates.” Her other candidates for price controls include “home prices” and “productive inputs” such as “energy,” “certain . . . metals, and other natural resources.”
Under Professor Omarova’s radical plan, the government would replace the free market in how wages and prices are set. The government would control everything from the size of your paycheck to the amount you pay at the grocery store and the gas station.
If her radical idea sounds familiar, that’s because it is. It’s been tried—and failed spectacularly—time and again in centrally planned economies, like the Soviet Union. In fact, Soviet efforts to control prices and the economy were so abysmal that they spawned countless jokes within the USSR that illustrate the folly of central planning.
One of my favorites is about a man who walks into a store. He asks the shopkeeper: “You don’t have any meat, do you?” The shopkeeper replies: “No, we don’t have any fish. The store next door is the one that doesn’t have any meat.”
While we can laugh at this joke now, the pain and suffering caused to real people by the Soviet Union’s shortage of food and necessities caused by central planning is no laughing matter. Government-run economies like the one Professor Omarova proposed don’t work.
And let me repeat a point I’ve made before about Professor Omarova. The fact that she was born and raised in the Soviet Union in no way affects whether the Senate should confirm her to run a major federal financial agency. But her advocacy for policies that resemble the Soviet Union’s economic policies absolutely affects that decision.
Professor Omarova would likely argue that her centrally planned economy would be different. As her paper notes, the Fed does already use Open Market Operations to implement monetary policy.
So why not let the Fed use a similar mechanism to set and maintain stable prices for important assets? The answer is simple: Making decisions about what individual assets across the economy should cost is a dramatically different endeavor, which no government technocrat can do as well as a market can.
In addition, the government technocrats at the Fed get monetary policy wrong so often we should not be seeking to expand their mission. If you’re someone who thinks the Fed has done a lousy job controlling inflation today, just wait until they start “controlling” prices, too.
The more I read the radical ideas that Professor Omarova has advocated for and consider the enormously harmful effects they would have on our economy, the more troubled I am by her nomination. I strongly urge President Biden to reconsider his decision to nominate her.