March 07, 2024 | OPINION | By Zoraiz Zafar
When George Washington declined to run for a third presidential term while the great American experiment was still in its nascent stages, a well-defined and justified precedent was set: democracy is bigger than any one person. The decentralized power concept on which the U.S. was founded does not derive its strength from relying on individual leaders but rather on established institutions that allow for stability and cohesion within the union.
While anti-Washingtonian D.C. politicians have created a cesspool of federal agencies that could be defined as institutions, I hold the belief that there are only two institutions that lay at the core of the American democratic free-market system: the U.S. Supreme Court and the Federal Reserve. As the highest court of the land, the Supreme Court settles federally applicable legal disputes that ensure the integrity and efficiency of our judicial system, making it a source of political and legal stability. The Federal Reserve, on the other hand, acts as the regulating and stabilizing authority for the free market, providing economic stability.
Unfortunately, both these institutions, and the ideas that they supposedly stand for, have been compromised by the hyper-partisan politics of the last few years. At the Supreme Court, the 6-3 ultra-conservative bench has been busy tearing apart decades-long established legal precedent like yesterday’s newspaper, as seen in decisions like Dobbs v. Jackson Women’s Health Organization, overturning Roe v. Wade, and the striking down of affirmative action in college admissions have not only polarized the nation but also fundamentally altered the landscape of American jurisprudence.
These rulings have a dual effect. On one hand, they showcase the court’s ability to enact monumental change; on the other, they erode the perceived impartiality and stability that the court is meant to represent. Such decisions fuel the perception that the Supreme Court is increasingly becoming an instrument of partisan agendas, thus weakening the very foundation of trust and respect that the institution relies on.
Moving on to the Federal Reserve, its traditional role as the steward of the nation’s monetary policy has been significantly compromised by the fiscal policies pursued by both Democratic and Republican presidential administrations in response to the COVID-19 pandemic. The massive, and arguably bloated, fiscal stimulus packages have led to unprecedented levels of borrowed spending. This, in turn, places enormous pressure on the Federal Reserve, diminishing its ability to effectively manage the money supply and control inflation through its traditional monetary policy tools.
The economic theory of monetarism, which emphasizes the importance of controlling the money supply to manage economic stability, suggests that when the government resorts to excessive spending, it risks fueling inflation without corresponding growth in productive capacity. The highly elevated levels of government spending leave the Federal Reserve with limited options, forcing it to choose between curbing inflation through interest rate hikes—which can slow economic growth and increase unemployment—or allowing inflation to run rampant, eroding purchasing power and savings. Therefore, as the policymakers in D.C. are dead set on the money printers, the Federal Reserve’s monetary stick has shortened, limiting its capacity to respond to economic crises with the precision and effectiveness that once defined its role.
While today’s realities may paint a grim picture, it is important to note that America’s key institutions are not alien to the effects of political polarization. In fact, the Supreme Court, while regarded very highly by the judicial system, has historically issued many judgements that were erroneous, flawed and in some cases warranted overturning. For instance, after President Franklin D. Roosevelt stacked the Supreme Court early on in his tenure, the court would go on to issue several questionable decisions, including Korematsu v. United States, which legalized the creation of internment camps for Japanese-Americans during World War II. Similarly, the Federal Reserve, under Paul Volcker’s leadership, played a strong supportive role for President Ronald Reagan’s supply-side economic policies of the 1980s.
This suggests that all hope must not be lost to bring back these institutions to their apolitical and constitutional mandates. Democracy has proven itself to be bigger than any one person in the past, and there is no reason to believe that the power of democracy will not triumph yet again over the darkness of division. All it will take is political leadership with principles, and perhaps some guts.