One year and one month ago, President Obama nominated MIT's Peter Diamond to serve on the Fed's board of governors. Republicans held up the nomination. Obama nominated him again. Republicans held up the nomination again. Diamond won the Nobel Prize in economics. Obama nominated him again. Republicans -- you can see where this is going -- blocked him .
Diamond has officially given up and pulled his own nomination, exiting with a New York Times op-ed about how stupid Washington is.
The easy answer is to point to shortcomings in our confirmation process and to partisan polarization in Washington. The more troubling answer, though, points to a fundamental misunderstanding: a failure to recognize that analysis of unemployment is crucial to conducting monetary policy.
Can't it be both? The main opponent in this process was Sen. Richard Shelby, whose criticism of Diamond was remarkably glib. Diamond, said Shelby, didn't have any experience
on monetary policy; fair enough, and Shelby was one of only 10 Republicans who voted for Tim Geithner, who did have that experience before heading to Treasury. And Geithner's been a terrific success, right?* The problem: The experience argument was a cover story for Shelby's real opposition to Diamond, which, he explained, was that the nominee seemed to agree with Barack Obama.
[H]e is an old-fashioned, big government Keynesian. He supported bailing out the big banks during the crisis. He supports additional stimulus and quantitative easing. He supports the use of behavioral economics to help bureaucrats control the choices Americans make. Finally, he has even advocated the creation of a GSE modeled after Fannie and Freddie to subsidize health care.
Goodwin Liu, Elizabeth Warren, Peter Diamond -- all of them unconfirmable in a Senate run by Democrats, all because Republicans have the power, and use the power, to hold up anyone they damn well please. It's one thing to hold up judges like Liu; they're lifetime appointees, and they're dangerous in the long run. But we're at the point now where academics in their 60s, with no political ambitions,* can't be appointed. Boards like IPAB and the CFPB? Republicans don't like that they exist; they probably can't be staffed, ever.
In two years, we'll either have a Democratic president with a more Republican Senate, or a Republican president with less than a Republican supermajority in the Senate. Does anyone think "controversial" nominees will be confirmed in either scenario? No, me neither.
*This is sarcasm.
**I'm skeptical of the "Draft Warren for Senate" stuff.
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