article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Price Stability Act of 2008''. SEC. 2. FINDINGS; STATEMENT OF POLICY. (a) Findings.--The Congress finds the following: (1) Price stability is a prerequisite for sustainable long- term economic growth, job creation, and moderate interest rates. (2) Inflation erodes the value of Americans' income and savings. (3) Inflation distorts the pricing system and the efficient allocation of resources in the economy. (4) Inflation makes long-term planning difficult and raises the effective tax rate on capital, thereby impeding investment. (5) Through its determination of monetary policy, the Board of Governors of the Federal Reserve System is ultimately responsible for controlling the long-run rate of inflation in the economy. (6) The multiple policy goals of the Full Employment and Balanced Growth Act of 1978 cause confusion and ambiguity about the appropriate role and aims of monetary policy, which can add to volatility in economic activity and financial markets. (7) There is a need for the Congress to clarify the proper role of the Board of Governors of the Federal Reserve System in economic policymaking, in order to achieve the best environment for long-term economic growth and job creation. (8) An explicit price stability goal would promote transparency, accountability and credibility in monetary policy. (9) Price stability should be the primary long-term goal of the Board of Governors of the Federal Reserve. (b) Statement of Policy.--It is the policy of the United States that-- (1) the principal economic responsibilities of the Government are to establish and ensure an environment that is conducive to both long-term economic growth and increases in living standards, by establishing and maintaining free markets, low taxes, respect for private property, and the stable, long- term purchasing power of the United States currency; and (2) the primary long-term goal of the Board of Governors of the Federal Reserve System should be to promote price stability. SEC. 3. MONETARY POLICY. (a) Amendment to the Federal Reserve Act.--Section 2A of the Federal Reserve Act (12 U.S.C. 225a) is amended to read as follows: ``SEC. 2A. MONETARY POLICY. ``(a) Price Stability.--The Board and the Federal Open Market Committee (hereafter in this section referred to as the `Committee') shall-- ``(1) establish an explicit numerical definition of the term `price stability'; and ``(2) maintain a monetary policy that effectively promotes long-term price stability. ``(b) Market Stability and Liquidity.--Subsection (a) shall not be construed as a limitation on the authority or responsibility of the Board-- ``(1) to provide liquidity to markets in the event of a disruption that threatens the smooth functioning and stability of the financial sector; or ``(2) to serve as a lender of last resort under this Act when the Board determines such action is necessary. ``(c) Congressional Consultation.--Not later than February 20 and July 20 of each year, the Board shall consult with the Congress at semiannual hearings before the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives, about the objectives and plans of the Board and the Committee with respect to achieving and maintaining price stability. ``(d) Congressional Oversight.--The Board shall, concurrent with each semiannual hearing required by subsection (c), submit a written report to the Congress containing-- ``(1) numerical measures to help assess the extent to which the Board and the Committee are achieving and maintaining price stability in accordance with subsection (a); ``(2) a description of the intermediate variables used by the Board to gauge the prospects for achieving the objective of price stability; and ``(3) the definition, or any modifications thereto, of the term `price stability' established in accordance with subsection (a)(1).''. (b) Compliance Estimate.--Concurrent with the first semiannual hearing required by section 2A(b) of the Federal Reserve Act (as amended by subsection (a) of this section) following the date of enactment of this Act, the Board of Governors of the Federal Reserve System shall submit to the Congress a written estimate of the length of time it will take for the Board and the Federal Open Market Committee to fully achieve price stability. The Board and the Committee shall take into account any potential short-term effects on employment and output in complying with the goal of price stability. SEC. 4. REPEAL OF OBSOLETE PROVISIONS. (a) Full Employment and Balanced Growth Act of 1978.--The Full Employment and Balanced Growth Act of 1978 (15 U.S.C. 3101 et seq.) is hereby repealed. (b) Employment Act of 1946.--The Employment Act of 1946 (15 U.S.C. 1021 et seq.) is amended-- (1) in section 3 (15 U.S.C. 1022)-- (A) in the section heading, by striking ``and short-term economic goals and policies''; (B) by striking ``(a)''; and (C) by striking ``in accord with section 11(c) of this Act'' and all that follows through the end of the section and inserting ``in accordance with section 5(c).''; (2) in section 9(b) (15 U.S.C. 1022f(b)), by striking ``, the Full Employment and Balanced Growth Act of 1978,''; (3) in section 10 (15 U.S.C. 1023)-- (A) in subsection (a), by striking ``in the light of the policy declared in section 2''; (B) in subsection (e)(1), by striking ``section 9'' and inserting ``section 3''; and (C) in the matter immediately following paragraph (2) of subsection (e), by striking ``and the Full Employment and Balanced Growth Act of 1978''; (4) by striking section 2; (5) by striking sections 4, 5, 6, 7, and 8; and (6) by redesignating sections 3, 9, 10, and 11 as sections 2, 3, 4, and 5, respectively. (c) Congressional Budget Act of 1974.--Title III of the Congressional Budget Act of 1974 (2 U.S.C. 631 et seq.) is amended-- (1) in section 301-- (A) in subsection (b), by striking paragraph (1) and redesignating paragraphs (2) through (9) as paragraphs (1) through (8), respectively; (B) in subsection (d), in the second sentence, by striking ``the fiscal policy'' and all that follows through the end of the sentence and inserting ``fiscal policy.''; (C) in subsection (e)(1), in the second sentence, by striking ``as to short-term and medium-term goals''; and (D) by striking subsection (f) and inserting the following: ``(f) Repealed''; and (2) in section 305-- (A) in subsection (a)(3), by inserting before the period at the end ``, as described in section 2 of the Price Stability Act of 2008''; (B) in subsection (a)(4)-- (i) by striking ``House sets forth the economic goals'' and all that follows through ``designed to achieve,'' and inserting ``House of Representatives sets forth the economic goals and policies, as described in section 2 of the Price Stability Act of 2008,''; and (ii) by striking ``such goals,'' and all that follows through the end of the paragraph and inserting ``such goals and policies.''; (C) in subsection (b)(3), by inserting before the period at the end ``, as described in section 2 of the Price Stability Act of 2008''; and (D) in subsection (b)(4)-- (i) by striking ``goals (as'' and all that follows through ``designed to achieve,'' and inserting ``goals and policies, as described in section 2 of the Price Stability Act of 2008,''; and (ii) by striking ``such goals,'' and all that follows through the end of the paragraph and inserting ``such goals and policies.''.
summary: Price Stability Act of 2008 - Declares it is US policy that the principal economic responsibilities of the Government are to establish both long-term economic growth and increases in living standards, maintain free markets, low taxes, respect for private property, and the stable, long-term purchasing power of US currency. Declares that the promotion of price stability should be the primary long-term goal of the Board of Governors of the Federal Reserve System. Amends the Federal Reserve Act to revise the mandate of the Board and the Federal Open Market Committee to require them to: (1) establish a numerical definition of the term "price stability"; and (2) maintain a monetary policy that promotes long-term price stability. Requires the Board to consult with, and report to, Congress semi-annually about Board and Committee objectives and plans to achieve and maintain price stability. Repeals the Full Employment and Balanced Growth Act of 1978.