In Reality Check stories, Star-Telegram journalists dig deeper into questions over facts, consequences and accountability. Read more. Story idea? RealityCheck@star-telegram.com.
The Heritage Foundation’s conservative policy proposal known as Project 2025 is garnering more scrutiny even as former President Donald Trump has sought to distance himself from it.
The more than 900-page document includes objectives of restoring the family as the centerpiece of American life, dismantling the administrative state, defending the borders and securing “God-given rights to live freely.” Some of the proposals are supported by a majority of Texan Republicans, polls show.
Democrats have called it extreme. The National Education Association, one of the country’s largest labor unions, in July criticized the project’s recommendation to eliminate the Department of Education, calling it a continuation of what it said was an “attempt to dismantle our public schools” by Betsy DeVos, the education secretary under former President Donald Trump.
The progressive Washington, D.C.-based think tank Center for American Progress has called the project “an authoritarian playbook to systematically dismantle the checks and balances framework upon which American democracy is built.”
And editors at Scientific American have warned that Project 2025 would “sabotage science-based policies.”
But rather than serious criticism, one of the project’s proposed economic policies is getting laughed off by experts as out of touch and unfeasible.
Project 2025 calls for a return to the gold standard, the monetary system that linked the U.S. dollar directly to gold. President Richard Nixon took the United States off of the gold standard in 1971 to get inflation under control and avert a rush on U.S. gold reserves by foreign nations.
What do economists say about returning to the gold standard?
Or as TCU economics professor John Harvey put it: “Insane.”
“There’s no logical reason for the supply of money in a country to be linked to geology,” said the self-described “Cowboy Economist.”
Tethering our currency to a finite resource like gold does not jibe with continuous growth, said Harvey, who also publishes a blog on economics on the Forbes website.
“As the economy grows, you need more cash to carry out transactions, you need money to do that, and all the gold standard does is add a constraint that is completely unrelated to any of the economic activity that’s going on,” he said. “It just makes no logical sense.”
The 900-page Project 2025 Policy Mandate contends that the gold standard “forces governments to rein in spending and inflation lest their gold reserves become depleted.”
But that argument is not based on the realities of why the United States — along with the rest of the world — has seen such high rates of inflation in recent years, but rather a “very simplistic view of the way the economy works,” Harvey said.
Inflation rates began to rise in 2021 in response to the COVID-19 pandemic’s effects on global supply chains and overall trends in supply and demand, according to the Brookings Institution. Those issues were compounded by Russia’s invasion of Ukraine in February 2022.
“This drove up energy prices and it drove up food prices,” Harvey said. “So how would having a gold standard have changed the fact that there was a shortage of energy products and food? It doesn’t change that.”
The Project 2025 text states that the Federal Reserve causes cycles of inflation and recession, and proposes its elimination.
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But getting rid of the Fed is not feasible, according to Dirk Mateer, an award-winning economics professor and textbook author at UT Austin.
“The Federal Reserve is not going to be eliminated,” he said, adding that the more likely outcome of U.S. monetary policy is a stronger reliance on the central bank to “mask poor fiscal decisions.”
“We’ve gone down a road that has existed now for 100 years, and we’re actively using monetary policies in ways that we have not used in the past, which is in some ways very dangerous, because we’ve allowed ourselves to build up a large fiscal deficit because of Fed policy,” he said.
He recommends fiscal restraint so as not to saddle future generations with more debt, rather than schemes to return to the gold standard, which he described as more “policy tank dream” than serious policy proposal.
“If we had responsible fiscal leaders — and I’m talking about Democrats and Republicans, because they’re both equally guilty on this front — then it would be much easier for the Fed to implement the types of policies that make sense in terms of controlling interest rates and trying to minimize downside recessions and depressions or hyperinflation,” Mateer said.
Stony Brook University economics professor Stephanie Kelton, who has worked as a chief economist in the U.S. Senate, declined to even discuss the notion of going back to gold.
“I can’t imagine any sane person wanting to return to the gold standard,” she said.
The Heritage Foundation did not respond to a request for comment.
Do Texans want to return to the gold standard?
More than 76% of voters in the May 4 Texas Republican primary election approved a non-binding proposition — basically a survey — to use gold and silver as legal tender.
In 2023, two ultimately unsuccessful bills in both houses of the state Legislature attempted to create a digital currency backed by gold.
Locally, while the True Texas Project, which started off as the NE Tarrant Tea Party, does not overtly espouse the idea of returning to the gold standard, it does host the annual True Texas Gold Eagle Essay Contest, meant to “encourage students to learn more about the US currency system and where it has fallen short.”
True Texas Project founder and CEO Julie McCarty said in an emailed statement, “We don’t really have a stance on this.”
While some Texans may view a return to the gold standard as a move away from big government, the gold-backed dollar actually led to what many would consider a significant government overreach. In 1933, President Franklin D. Roosevelt seized all U.S. citizens’ gold to protect the dollar during the Great Depression.
In order to actually pull off a return to the gold standard, politicians would have to sell the idea as the opposite of big government, that it’s “less government, because now things are being constrained by the supply of gold,” said Harvey of TCU.
“People have this false notion that gold is somehow safe,” he said.
