Legislative Politics

Who Wants to Audit the Fed?

Sarah Binder Nov 24 '09

An interesting narrative emerged last week about Ron Paul’s victory in the House Financial Services Committee. After nearly thirty years of advocating reform of (aka abolishing) the Federal Reserve, Ron Paul’s amendment to subject the Fed to a comprehensive audit was adopted with the support of all of the panel’s Republicans and over half of the panel’s Democratic members. As The Huffington Post suggested soon thereafter, “Key to winning Democratic support was a letter posted early Thursday from labor leaders and progressive economists.” That support, the author continues, enabled Paul’s Democratic ally, Alan Grayson of Florida, to show that “the liberal base was behind him.”

Was this really an ends-against-the-middle coalition? Liberals and conservatives (and one libertarian) ganging up against the center? As it turns out, that narrative fails to explain the political dynamics driving Ron Paul’s improbable win. Once we look at the behavior of Ron Paul’s Democratic co-sponsors, it’s clear that Paul succeeded simply by securing the overwhelming support of the committee Democrats who had already publicly endorsed his bill.

Were those Democrats disproportionately liberal? Hardly. I ginned up a little model to estimate the likelihood that a House Democrat would co-sponsor Ron Paul’s bill. A few trends emerge. First, freshmen Democrats were more likely than their colleagues to co-sponsor. Second, Blue Dog Democrats—not liberal Democrats—were more likely to sign on. Third, members of the Financial Services Committee—perhaps more beholden to the current regulatory structure– were less likely to lend their name to Ron Paul’s effort. Finally, Democrats from decidedly Democratic districts are actually less, not more, likely to formally support auditing the Fed.

The coalition to rein in the Fed appears to run from center to the far right—meaning that Barney Frank’s work is cut out for him if he wants to rein in Ron Paul and preserve some independence for an embattled Fed. Liberals are already on Barney’s side; converting moderate and conservative Democrats—eager to show some populist stripes by bashing the Fed as 2010 approaches– may prove a tougher task.