Last year, the Senate Banking Committee twice approved Peter Diamond’s nomination to the Federal Reserve. And twice, the Senate wasn’t allowed to vote on Diamond because Sen. Richard Shelby (R-Ala.) and a handful of his far-right colleagues threw tantrums for unknown reasons.
So, this year, President Obama resubmitted the Diamond nomination. And once again, the petulant Republican from Alabama led a small contingent that decided they’re entitled to veto power over the process.
After more than a year of waiting for a simple vote, Diamond has given up. In a New York Times op-ed, the respected Nobel laureate explained why he’s withdrawing.
Instead of going to the Fed, however, I will go about my congenial professional existence as a professor at M.I.T., where I have taught and researched since 1966, and I will take advantage of some of the many opportunities that come to a Nobel laureate. So don’t worry about me.
But we should all worry about how distorted the confirmation process has become, and how little understanding of monetary policy there is among some of those responsible for its Congressional oversight. We need to preserve the independence of the Fed from efforts to politicize monetary policy and to limit the Fed’s ability to regulate financial firms.
It’s important to understand the significance of these developments. Diamond’s withdrawal offers a jarring reminder of the ways in which our political process, with increasing frequency, simply doesn’t work.
Diamond is among the most accomplished economists of his generation, and last year, was awarded a Nobel Prize in economics. And yet, there was Richard Shelby & Co., insisting that Diamond lacked the qualifications to join the board of governors of the Federal Reserve.
As far as the dimwitted senator and his cohorts were concerned, Diamond’s background is not in monetary policy, which necessarily raised doubts about his nomination. It’s true that this isn’t Diamond’s specific field, but it’s hardly a prerequisite — of the five sitting Fed governors at the time of Diamond’s nomination, three were not specialists in monetary economics. One of Bush’s appointees has no advanced degree in economics at all and has never done any academic research in the field.
What did Shelby have to say about this nominee? Nothing — the Republican senator supported Bush’s unqualified nominee, raised no questions about the nominee’s background, and voted for confirmation.
Making matters worse, Diamond’s expertise — the scholarship that produced a Nobel prize — is in understanding competing kinds of unemployment. Paul Krugman, himself a Nobel winner, noted a while back that “there’s an ongoing dispute over what the rise in vacancies without a corresponding fall in unemployment means,” and as luck would have it, Diamond “pioneered the whole study of this subject.”
But for reasons that defy comprehension, Shelby simply decided he just doesn’t like Diamond. The confused Alabamian had the option of registering his opposition by voting against Diamond’s nomination, but the Republican lawmaker decided that wasn’t good enough — the Nobel laureate was so offensive, Shelby believed the Senate simply couldn’t be allowed to vote on the nominee at all.
Cohn and Bernstein suggest the Obama White House deserves some of the blame, because the West Wing didn’t push the Diamond nomination as hard as it could have. Perhaps. But recent history suggests right-wing lawmakers generally don’t care about presidential pressure, and besides, the Senate should be able to function and complete its most basic tasks without constant reminders from Obama.
This is no way to run an advanced democracy in the 21st century. The result of this fiasco isn’t just the loss of a qualified nominee to an important post; it’s also a lost opportunity to have the Fed take actions to bolster the economy.
We can only hope that this wasn’t part of a larger campaign by Republicans to hurt the economy on purpose.