Project 2025 targets the Fed's dual mandate, lender-of-last-resort, and balance sheet — each change would redistribute risk to workers and households

The Federal Reserve chapter of Project 2025 (pages 731–733) is a carefully argued brief for narrowing the central bank's mission and tools. Its core proposals — eliminating the dual mandate, restricting emergency lending, and reducing the balance sheet — are presented as reforms to restore 'neutrality' and limit moral hazard. But the distributive story is unmistakable: each change would shift risk and opportunity costs from financial markets onto working families.

Take the dual mandate. The chapter argues that the Fed's accommodationist bias toward full employment 'inadvertently contribute[s] to recessions' (p. 732) and that a price-stability-only mandate would 'mitigate economic turmoil.' The problem is that choosing price stability over employment is a policy choice about who bears the pain of inflation control. When the Fed treats unemployment as the tool to cool prices, the cost falls on workers who lose hours, lose jobs, or see wages stagnate. Asset holders, meanwhile, are comparatively insulated. This is not neutral: the Fed's own research shows that low-income households experience proportionally larger welfare losses from labor-market slack.

The lender-of-last-resort restriction is similarly regressive in effect. The chapter frames emergency lending as a 'standing bailout offer' (p. 732) that encourages recklessness. But the history of 2008 and 2020 shows that the LOLR function is what prevented a complete collapse of the payment system and credit intermediation on which households, small businesses, and local governments depend. Limiting it would force more firesales and bank failures in a future crisis — hitting depositors, borrowers, and state and local budgets far harder than the largest banks. The market discipline the chapter seeks would be felt as catastrophic liquidity crunches by nonfinancial firms.

As for the balance sheet: quantitative tightening (QT) is already underway, with the Fed's asset holdings declining from $8.9 trillion in 2022 to about $6.5 trillion as of 2025 (CRS IF12147). That process is managed — the Fed reduces holdings gradually to avoid undue market strain. Project 2025 calls for accelerating or cementing this wind-down (see pp. 733-736). At a time when Treasury is issuing debt for public investment, shrinking the Fed's footprint could cause volatility in the Treasury market, raise borrowing costs for the government and for households via mortgage rates, and drain bank reserves that support community lending. The distributive impact is regressive: the pain of tighter financial conditions falls on the real economy before it touches Wall Street.

Together, these three proposals would rewire the Fed around a pre-1970s framework — one that prioritized creditor and asset interests over labor-market outcomes and crisis management (see, e.g., the chapter's implicit return to pre-Humphrey-Hawkins norms, p. 731). The alternative is a full-employment Fed that treats the dual mandate as a moral commitment and uses its tools — including targeted lending authority and balance-sheet management — to preempt recessions, support public investment, and ensure that the costs of a given crisis do not fall disproportionately on those with the least savings and market access.