WASHINGTON — How independent should the Federal Reserve be?

The general consensus in the wake of the Great Recession has been that the nation’s central bank should operate in a politically sterile environment, pulling whatever levers are necessary to ensure the economy gets back on track – whether that means slashing interest rates to zero or pumping $4 trillion into the recovery. A recent push by conservative Republicans to increase oversight of the Fed has only deepened the central bank’s commitment to autonomy.

That’s why a new Brookings paper released Tuesday is so provocative. It calls for greater cooperation between the Treasury Department and the Fed, particularly during the type of unusual economic and monetary circumstances of the past six years. Lead author Robin Greenwood of Harvard Business School, along with his university colleagues Samuel Hanson, Joshua Rudolph and Lawrence Summers, argue that the lack of coordination has actually diluted progress toward their goals for both institutions.

The paper uses quantitative easing as a case study. Since 2007, the Fed has quintupled its balance sheet to more than $4 trillion by buying up long-term securities. The idea was that soaking up lots of long-term debt would help push down a broad spectrum of interest rates – and it worked. The authors estimate the Fed’s bond-buying program reduced the yield on 10-year Treasury bonds by 1.37 percentage points.

Now, for the but: At the same time that the Fed was trying to stimulate the economy by loading up on long-term bonds, Treasury was increasing its issuance of long-term debt in the midst of a bleak budget outlook. According to the authors’ calculations, the volume of government debt that matures in five years or longer and is held by the public – not by the central bank – has nearly doubled from 8 percent of gross domestic product to 15 percent of GDP.

The paper calls the result “reverse quantitative easing.” The authors estimate it has increased 10-year Treasury yields by nearly half a percentage point. The Fed and the Treasury haven’t just been working independently, the paper argues. They have been actively working against each other.

The authors argue that quantitative easing has already blurred the lines between fiscal and monetary policy. They conclude by calling for the central bank and the Treasury to acknowledge what is already occurring in practice. In theory, that would mean agreeing to managing the debt in a way that promotes America’s “national interest.”

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