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An Embroidered Question
CGI
2025
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To the Board of Governors of the Federal Reserve System—in recognition of the ongoing challenge of aligning institutional independence with public responsibility.
By Ricardo Morin
July 27, 2025
Abstract
This essay examines the conceptual validity of an independent treasury, free from executive control and governed by long-term, nonpartisan economic reasoning. It argues that the alignment of fiscal institutions with short-term political leadership creates structural risks that compromise transparency, sustainability, and public trust. By contrast, an autonomous treasury—operating within clear legal mandates and guided by professional expertise—can promote fiscal stability and integrity while preserving essential democratic oversight. The analysis rejects both executive subordination and technocratic absolutism, and proposes a balanced institutional model in which independence functions as a form of principled restraint. This concept, as developed in the essay, refers to the structured and lawful limitation of authority in pursuit of long-term public interest—discipline rooted not in detachment, but in ethics, transparency, and legality. This framework, abstracted from any specific national context, is intended to apply broadly to the theory and design of sound fiscal governance.
The Case for an Independent Treasury
The question of how a treasury should be structured—whether subordinated to political leadership or operating autonomously—raises fundamental concerns about institutional integrity, fiscal responsibility, and democratic accountability. While treasuries are often housed within executive power, there is a strong theoretical case for granting such institutions political independence. A treasury removed from direct control of governing administrations and guided instead by economic expertise, long-term reasoning, and publicly defined mandates can provide a more stable and ethically sound foundation for fiscal policy.
At the heart of this argument is the fact that fiscal decisions—such as setting tax levels, allocating public spending, and managing debt—extend far beyond the timeline of electoral cycles or political terms. When treasury operations are subject to short-term political priorities, fiscal policy risks being distorted by opportunism—through unsustainable tax cuts, politically timed spending increases, or the concealment of uncomfortable debt projections. These distortions undermine both the credibility of fiscal governance and the long-term stability that supports public trust and financial soundness.
A common set of distortions includes election-cycle spending surges that prioritize immediate electoral gains over lasting fiscal balance; strategic underreporting or reclassification of deficits to hide true fiscal conditions; and biased tax enforcement, where tax authorities selectively target or protect groups based on political motives. Such behaviors not only threaten fiscal sustainability but also weaken the treasury’s role as a neutral guardian of public resources.
Principled restraint is key to addressing these challenges. This concept refers to a structured commitment to ethical limits and responsible governance. It is a form of authority that binds itself willingly to the public interest, resisting both political capture and technocratic arrogance. Principled restraint is not the absence of power, but its disciplined and transparent exercise, grounded in law, deliberation, and long-term accountability. It affirms the treasury’s role as a steward of the public good across political transitions and economic cycles.
An autonomous treasury, governed by clear statutes and staffed by nonpartisan experts, can anchor fiscal management to long-term goals such as sustainability, fairness, and generational equity. Its purpose is not to replace democratic decision-making but to ensure that such decisions are carried out with consistency, impartiality, and professional skill. Just as some institutions responsible for macroeconomic stability are insulated from immediate political pressures, so too might a treasury—especially in functions like forecasting, revenue collection, and debt issuance.
The credibility of an independent treasury extends beyond its internal workings. Reliable and professionally managed fiscal behavior builds confidence among citizens, investors, and institutions. When financial governance is free from sudden reversals or partisan manipulation, it fosters trust and encourages long-term investment. Independence also helps prevent the politicization of fiscal enforcement, reducing the temptation to use taxation or regulations as tools of political favor or retaliation.
However, institutional independence is not without risks. Fiscal decisions are not merely technical; they are moral and distributive, touching on societal values, justice, and competing visions of the common good. Shielding these decisions entirely from democratic debate risks technocratic overreach, ideological rigidity, or disconnect from lived realities. Expertise alone cannot legitimize choices that affect livelihoods and social priorities.
The solution is not absolute independence but a careful balance between insulation and accountability. A treasury designed for long-term neutrality must be bound by clear mandates, subject to transparent review, and accountable through publicly visible processes. Its leadership should be appointed through pluralistic methods that reduce capture by any one faction, and its actions should undergo open reporting, independent audits, and legal oversight. Protected from arbitrary dismissal or short-term interference, it must still answer ultimately to the legal and ethical framework established by society through its representative institutions.
Moreover, any institutional design must include mechanisms for coordinated emergency response. No treasury, however independent, should be structurally paralyzed in times of acute crisis. Temporary protocols for collaboration with political authorities—limited by law and time—ensure that flexibility does not compromise integrity.
Ultimately, the case for an independent treasury rests not only on technical competence but on maintaining civic trust. When fiscal governance is shaped by rules rather than impulses, by analysis rather than improvisation, and by impartial stewardship rather than partisan interest, it becomes a stabilizing force in public life. The institutional form must embody a dual commitment: to professional expertise and democratic legitimacy. Independence, in this sense, is not isolation but principled restraint—a structured commitment to ethical limits and responsible governance. It is the disciplined and transparent use of power, grounded in law, public deliberation, and long-term accountability. This discipline protects the treasury’s role as steward of the public good across political changes and economic cycles.
Any society seeking to secure the long-term integrity of its public finances must confront the structural incentives shaping its treasury. If fiscal authority remains vulnerable to fleeting political agendas, sustainability will always be precarious. But if that authority drifts too far from public input, it risks losing the legitimacy it depends on. The challenge is to build institutions that are durable without becoming unresponsive, disciplined without becoming opaque, and independent without giving up accountability.
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Annotated Bibliography
- Blyth, Mark: Austerity: The History of a Dangerous Idea. New York: Oxford University Press, 2013 (Blyth explains how austerity, often framed as a technical necessity, has historically served as a political tool to restructure economic power. His analysis is crucial to understanding why an independent treasury should not be conceived as a default promoter of restrictive policy but as an institution committed to fiscal sustainability with social responsibility).
- Brunner, Roger: “Independent Fiscal Authorities: A Comparative Analysis”. Public Finance Quarterly 21 (4): 482–505. Thousand Oaks: Sage Publications, 1993 (Brunner offers a comparative analysis of different models of independent fiscal authorities. His study provides an empirical foundation for evaluating how institutional independence can be balanced with effective mechanisms of democratic accountability).
- Goodhart, Charles, and Dimitrios Tsomocos: The Challenge of Fiscal Independence. London: CEPR Press, 2021 (This volume examines the conceptual and practical challenges of separating fiscal policy from short-term political pressures. Its contribution is key to supporting the argument that fiscal independence must be grounded in clearly defined limits and democratic legitimacy to avoid self-referential technocracy).
- Lledó, Victor, and Teresa Ter-Minassian: “Fiscal Councils and Independent Fiscal Institutions”. Washington; IMF Working Paper WP/22/47. International Monetary Fund, 2022 (This IMF paper provides a detailed overview of independent fiscal institutions across multiple jurisdictions. It emphasizes that the effectiveness of such institutions depends not only on their legal design but also on their integration into transparent democratic processes).
- Ooms, Thomas: “Fiscal Policy and the Risk of Politicization”. Journal of Economic Perspectives 32 (3): 75–92. Nashville: American Economic Association, 2018 (Ooms argues that the politicization of fiscal policy leads to significant distortions in resource allocation. His article supports the idea that a structurally protected treasury can reduce the risk of decisions driven by partisan interests).
- Stiglitz, Joseph E.: Economics of the Public Sector. New York: W. W. Norton, 2000 (This classic textbook offers a comprehensive framework on public sector economics. Stiglitz’s discussion of market failures and the role of institutions provides a solid theoretical foundation for justifying the careful design of a treasury with structural independence and public accountability).
- Wehner, Joachim: Legislatures and the Budget Process: The Myth of Fiscal Control. New York: Palgrave Macmillan, 2010 (Wehner challenges the presumption that legislatures exercise effective control over public budgets. His work suggests that, given legislative weakness, strengthening the institutional role of the treasury may be necessary to ensure transparency and fiscal discipline).
Observations On Perception 