During the past half century, policymakers in the U.S.
have consistently sought to chart a stable course for
economic growth. The importance accorded to this
goal does not merely owe to the views of select policymakers,
but is mandated by law. In 1946, Congress
passed the Employment Act, which encouraged the
federal government to adopt policies that would lead
to maximum employment and price stability. Evidently
dissatisfied with the fulfillment of these goals, some
30 years later Congress passed the Full Employment
and Balanced Growth Act in 1978 (also known as the
Humphrey–Hawkins Act after its two coauthors), which
strengthened the original Employment Act. Among
other things, the 1978 law mandated that the Federal
Reserve should specifically aim to maintain economic
growth in line with the economy’s potential to expand.
That is, policymakers were instructed to steer
the economy in such a way as to ensure steady output
growth, fast enough to maintain full employment
but not so fast as to ignite inflation.