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Art Laffer says the Federal Reserve should be controlled by the president and Congress

Lisa Micheal 4 Jul 8

The Federal Reserve shouldn't be an independent entity, economist Art Laffer told CNBC's "Squawk Box " on Monday.

"I don't understand why the Fed is independent, to be honest," said Laffer, a former economic advisor to President Donald Trump and former President Ronald Reagan. "Fiscal policy is not independent. Military policy is not independent. Social policy is not. Why should monetary policy, this very powerful tool to control the economy not be subjected to democracy just like every other instrument of government?"

Laffer's comments come as Trump continues his criticism of the Federal Reserve, calling it on Friday the "most difficult problem" the U.S. faces.

"As well as we are doing from the day after the great election, when the market shot right up, it could have been even better - massive additional wealth would have been created, & used very well," Trump tweeted. "Our most difficult problem is not our competitors, it is the Federal Reserve!"

Trump has repeatedly criticized Federal Reserve Chairman Jerome Powell, whom Trump appointed, for its decisions to raise interest rates four times last year and maintain rates this year.

On Monday, Laffer reiterated claims he made last week on "Closing Bell, " saying the Fed should be controlled by the legislative and executive branches of government, rather than having independent actors made decisions for the Central Bank.

"You get this back and forth all the time" because of the difference, said Laffer, co-author of "Trumponomics: Inside the America First Plan to Revive Our Economy."

"Obviously there's a difference between the executive branch and the Fed," he added, saying a divide will continue until it's no longer an independent actor.

Last month, Trump presented Laffer — considered the ″father″⁣ of supply-side economics — with the Presidential Medal of Freedom. Laffer is known for the Laffer Curve theory that argues that increasing tax rates beyond a certain point becomes counterproductive for raising revenue.