Editore"s Note
Tilting at Windmills

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August 7, 2010

WHY PETER DIAMOND'S NOMINATION MATTERS MORE THAN YOU THINK.... President Obama nominated three accomplished experts a few months ago to serve on the board of governors of the Federal Reserve -- an entity with more than a little influence over the macroeconomic conditions in the U.S. economy. The Senate Banking Committee approved all three nominees.

But this week, one of the brilliant scholars ran into trouble. The development was significant, as was the larger significance regarding Republicans' political motivations.

[U]nder an arcane procedural rule, the Senate sent [M.I.T. professor Peter Diamond's] nomination back to the White House on Thursday night before starting its summer recess. A leading Republican senator, Richard C. Shelby of Alabama, said that Mr. Diamond did not have sufficiently broad macroeconomic experience to help run the central bank. [...]

All three nominees were approved by the Senate Banking Committee, and there does not seem to be enough opposition to permanently block Mr. Diamond. "This is standard operating procedure in the Senate, and we expect that the president will renominate Peter Diamond," a White House official said of the delay.

Mr. Diamond, 70, joined the M.I.T. faculty in 1966 and is an authority on taxation, Social Security, pensions, Medicare, labor markets and behavioral economics.

Even for a hack like Shelby, questioning Diamond's experience is both crazy and pathetic -- the scholar is among the most accomplished economists of his generation. The conservative Alabaman suggested the Diamond's background is not in monetary policy, which is true, but is hardly a prerequisite -- of the five current governors of the Fed, three are not specialists in monetary economics. One of Bush's appointees has no advanced degree in economics and has never done any academic research in the field. Shelby never raised questions about his qualifications and didn't hesitate to support that nomination.

So, what's this all about? It's worth considering the possibility that congressional Republicans, not content with blocking legislation that might improve the economy, also want to prevent the Federal Reserve from exercising its powers and pumping more capital into the economy. Jonathan Cohn's take, explaining what President Obama's nominees may do if confirmed to the Fed, is worth reading.

One of his nominees, Janet Yellen, has said publicly that the Fed has an obligation to focus more on employment during times like these. And while I don't know whether Diamond has said similar things, I know enough about his philosophical bearings to know -- or, at least, suspect strongly -- that he'd push for more employment-focused policies, as well. As Paul Krugman notes today, Diamond wrote the seminal paper on structural shifts in unemployment.

In other words, Obama's nominees may very well use the power of the Fed to improve the American economy -- so Shelby is slowing the process down, on purpose, and making the White House needlessly jump through procedural hoops without a coherent explanation.

It may be because Shelby is "just being a prick," but it seems just as likely that the Republican senator hopes to paralyze the Federal Reserve, keeping it from giving the economy a much-needed boost.

Steve Benen 10:40 AM Permalink | Trackbacks | Comments (22)

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The Republicans, especially Senate Republicans, are basically trying to sabotage the federal government until they get their way. It's coup de ta by a thousand cuts.

Posted by: Patrick Star on August 7, 2010 at 10:48 AM | PERMALINK

If and when Republicans take back the Senate, god forbid, they will kill any and all rules that they used to block Obama appointees and Democratic legislation. They won't hesitate for a second. One or two Dems might mildly complain on television, but for the most part, it will go unnoticed.

Posted by: Chris on August 7, 2010 at 11:04 AM | PERMALINK

No, my guess is the GOP has fantasies of pushing for SS reform if (in their minds, when) they take over Congress in November or, at the latest, if (in their deranged mind when) President Palin takes office in Jan 2013. Academic economists will patiently point out the flaws in their proposals, as they did in '05. But they want to make sure that the inevitable criticism from one of the leading academic SS scholar alive, Prof Diamond, won't also have the imprimatur of his being a Fed governor.

As always, they're three steps ahead of Democrats, even if those steps are often along a path of fantasy and delusion.

Posted by: Basilisc on August 7, 2010 at 11:10 AM | PERMALINK

"It may be because Shelby is "just being a prick," but it seems just as likely that the Republican senator hopes to paralyze the Federal Reserve, keeping it from giving the economy a much-needed boost."

The two aren't mutually exclusive.

Posted by: Miki on August 7, 2010 at 11:11 AM | PERMALINK

Immediate recess appointment, along with all other delayed appointments. Not that that would happen. Might hamper bipartisan cooperation in Congress.

Posted by: JMG on August 7, 2010 at 11:14 AM | PERMALINK

Once again I will take this opportunity to apologize for the pricks my state sends to Washington.

Posted by: martin on August 7, 2010 at 12:25 PM | PERMALINK

Recess appointments, please.

Posted by: PTate in MN on August 7, 2010 at 12:42 PM | PERMALINK

Yes, the solutions to America's problems is o print more money so we can be as prosperous as Zimbabwe, who also printed more money in an effort to become prosperous. In fact they even printed million dollar bills. That's what the U.S. should do, print million dollar bills.

Or we could stop Obama's war in Afghanistan, which just claimed another six U.S. lives. Just a thought.

Posted by: Sean Scallon on August 7, 2010 at 1:07 PM | PERMALINK

Yes, the solution to America's problems is to print more money so we can be as prosperous as Zimbabwe, who also printed more money in an effort to become prosperous. In fact they even printed million dollar bills. That's what the U.S. should do, print million dollar bills.

Or we could stop Obama's war in Afghanistan, which just claimed another six U.S. lives. Just a thought.

Posted by: Sean Scallon on August 7, 2010 at 1:08 PM | PERMALINK

And/or, anti-intellectualism. Shelby and other lawmakers want that Board of Governors to remain firmly in the hands of bankers, as Yglesias suggested.

Posted by: Algernon on August 7, 2010 at 1:15 PM | PERMALINK

Obama and the Senate Dems may remain terminally naive and political fools , but when will Benen and other Dems understand that Repub politicians care only to (re) gain and keep political control of government. Even Chamberlain learned after Czechoslovakia that negotiations with those whose primary goal is YOUR destruction is a fools errand.

If obtaining a strong Progressive and rational government to DC means replacing Obama and a dozen Senate Dems---or at least opposing them in many matters--- then the sooner that is done the better. The first order of tactical business is to break the filibuster--- for good. It can be done with 50 votes + Biden.

Posted by: gdb on August 7, 2010 at 1:36 PM | PERMALINK

@gdb: PLEASE 'SPLAIN THAT NONSENSE YOU JUST WROTE.

How do you plan to Obtain a progressive government by getting rid of Democrats? Do you HONESTLY think that when you get rid of Demcrats that the people will replace them with Liberals? Now who's naive? Jesus christ on a biscuit I will never understand the fantasies that run through some of your heads. You want better government? GET RID OF THE PEOPLE HELL bENT ON DESTROYING IT FIRST. THEN with hard work on the ground - ya know, talking to and educating Americans little by little about the progressive agenda, you can start squeezing out the DINO's for better Democrats. This of course will take years, are you ready to do that?

Posted by: Alli on August 7, 2010 at 2:10 PM | PERMALINK

more and more I am believin' that if the small committee (ie Senate Banking Committee) recommend someone then that should stand. They are much more the experts than the fools on the floor. Over and over again we see aholes like McCain, DeMint and Shelby making decisions that they have no reasonable reason to make. They do it because they can. what absolute hubris.

Posted by: sysprog on August 7, 2010 at 2:27 PM | PERMALINK

Republicans really do want to destroy the Federal government's power to govern, period. [See Glenn Beck's recent admission.] Why that would earn them brownie points with voters is way beyond me.

However, I have never thought that Obama, who was, after all in the Senate, was trying for bipartisanship for its own sake. He knew those guys, and he also knew that he would need to reach that ridiculous 60 threshold for each and EVERY piece of his agenda.

Continuing to fault his realism in this regard is getting sillier every day.

As it was taking place, at first, the left really complained--but at that point they did not know that the Republicans had made a pact to post a solid NO to everything.

I remain amazed that his administration has managed so much good legislation, given the treason of republicans.

Posted by: jjm on August 7, 2010 at 2:28 PM | PERMALINK

@JJM, it's not "treason". It's called rules. Republicans apparently have a game plan and are executing it. If anyone is being stupid it's the Obama team for being naive. Unless of course they're not naive and they secretly agree with the Repubs on this issue and many others (such as a lack of a public option). Then it's you and Steve who are being naive. If anyone is being naive it's those who claim Obama is "progressive" but yet don't really force him to make clear choices so to dispense with this uncertainty. Steve I'm looking at you.

@Alli. Do you think it's easier to replace a conservative Dem with a "progressive" Dem or it's easier to replace a die-hard Republican with a conservaDem? GDB apparently believes the former, you apparently believe the latter. It's not hard to figure out the positions of each so what you wrote is stupid in that context. No need for so many ALL CAPS, too.


Posted by: Observer on August 7, 2010 at 4:00 PM | PERMALINK

I remain amazed that his administration has managed so much good legislation

What good legislation.

The administration seems to believe in Political Homeopathy. Every new piece of legislation has been preemptively watered down to the level that it will has only insignificant effect on the problems it was supposed to solve.

Of course they can point to some 'major' bills that have been passed but they are all toothless laws existing only to pad Obama's resume.

Posted by: gregor on August 7, 2010 at 5:16 PM | PERMALINK

@ Observer, Alli appears to have been responding to gdb's stupid idea of "..obtaining a strong Progressive and rational government..." by "...replacing Obama and a dozen senate Dems - or at least opposing them on many matters...". Just HOW this will provide a progressive government Mr/Mrs/Ms gdb fails completely to state.
With good reason, too. The President is not up to legal challenge until 2012. Apparently the fantasy game plan is to completely cripple this administration from the left AND the right. That will insure - what?
Of the Democratic senators up for re-election this year, Lincoln is the only non-centrist Democrat who comes to mind, and she is probably going to lose - to a Republican. Just what the Senate and this country needs, another Republican in the Federal government beholden to the insane Teabagger base of the Republican Party. THAT'S going to make governing so much more "progressive and rational"!
As long as the Senate Democratic numbers are greater than 60, it wouldn't matter if every senate pick-up the Democrats would make is another conservaDem, because progressives would still come out ahead. True, we would STILL have to negotiate with the conservaDems, but those negotiations would be with what remains of the sane old GOP; as those voters now register either as independents or Democrats. Legislation may be watered down, but "watered-down" does NOT preclude being effective; it DOES mean that some problems may have to be addressed more than once. The shame! The horror!
Apparently that prospect of incomplete immediate perfection is what is so upsetting to Mr/Mrs/Ms gdb; thus the obvious resulting loss of sanity.
Getting RID of the filibuster isn't going to happen and isn't a particualrly good idea anyway. Best to return the filibuster to the way it operated prior to the 1980s; replacing the hardships of pulling a filibuster back on the Senator filibustering will allow almost ALL of the presently back-logged legislation to proceed to the Senate floor and be voted on.
Since that's our goal, we should be contacting our Senators and various progrssive organizations; ie, Move On, VoteVet, etc to also petition the Senators to return the filibuster to its "original" form. If nothing else, should the worst, to me at least, happen and the Republicans regain the Senate (before regaining their sanity) and change the filibuster rules AGAIN, it will be possible to call them out on their radical agenda.
That is, if we're allowed to...

Posted by: Doug on August 7, 2010 at 6:25 PM | PERMALINK

JJM and Alli. And to add to the Observer:

It has been obvious for some time that Obama and the Senate Democrats have made/ continue to make serious a serious strategic political error and a tactical political error that already be fatal. The strategic error is in not strongly and consistently trying to change public opinion on Republican bonkers, ideologicaly-based policies on economics and American Exceptionalism. The tactical error is in not ending the Senate filibuster. Ironically, if they win -- and the day they need to do so-- the Republicans will break the filibuster. Saving the filibuster "for good use by Dems later on" is fatally naive. Welcome to Czechoslovakia.

To correct these two fundamental errors, leaders must change-- or new leaders elected. We've seen enough of Obama, Nelson, Lincoln, Baucus, Landrieu, and several others to know that at best they're confused (whether or not they have IQ's of 180). In most cases(Snowe, Collins may be exceptions), it's MUCH easier to elect better Dems than change a Rep to a Dem. In fact, probably the only hope for Obama is to give him a strong Progressive figure with a following with whom to exercise his primordial instinct to compromise. [Huey Long did wonders for FDR who was much more Progressive and daring than BHO, and with much less instinct or need to compromise.]

Without quickly passing real stimulus for jobs, real health care reform, etc., etc., the Dems are like slowly cooking frogs in a pan. Most will eventually jump out. Best to jump out sooner than later. As one example the current stupidity and wussiness of Obama and his Dem Senate supporters: They think spending is unpopular--but unemployment and an economy moving in the wrong direction are yet-more unpopular. Republicans have these Dems so rattled, they're afraid of the disease and the cure--- and so frightened Obama and Senate Dems do next-to-nothing. Which is yet more unpopular.

Listen to Digby:"The party in power is expected to do what's necessary to pass its agenda. If it can't, it is held responsible for the failure, not those who stopped them from doing it. This is particularly true in the present circumstance. The president blaming a "do nothing congress" only works when the congressional majority is of the opposition party. When it's your own party [AND you have a near-supermajority], you just look like a weak leader [with dumb or pusillanimous congressional supporters] and people think the underdog Republicans are simply "playing the game" better and so deserve to "win." If I'm an average Joe low info voter, I see confused and frightened Dems and Repubs who aggressively take flack. I sure want the latter negotiating on my behalf with a Korean "Dear Leader".

Posted by: gdb on August 7, 2010 at 6:43 PM | PERMALINK

Doug. What a straw man you set up... change is hopeless and opposition to Chamberlain/Millard Fillmore types is hopeless.

It's hard to see how continued unquestioning support of Obama and some 6-8 current Democratic Senators in Congress will make any difference unless they change their policies and break the filibuster. Who knows what could have passed in the way of real health care reform, adequate stimulus package, adequate financial regulation, whatever. Better and more Progressive bills were never strongly and consistently advocated by Obama. "Not very good, but better than GWB and the Republicans" is hardly a rousing political rallying cry.

Most of what Progressive's want today would have been supported by Nixon, Eisenhower, Kennedy, LBJ, Ford, FDR, TR, Truman-- Hell, even Dewey. So don't give me BS about advocating left-wing Socialist policies. And saying they can be improved in 20 years is supposed to be the answer?. I've heard that for 30 years.

Posted by: gdb on August 7, 2010 at 6:59 PM | PERMALINK

The 'loyal' opposition is also blocking most of Obama's nominees to Federal judgeships. This may not be just because they are obstructionists. Federal judges sit for life, or as long as they feel up to it, and the Republicans want those benches for their side. They likely feel that Obama is a one-termer and if they can stall long enough, they will get to appoint those judges. Even Republican Supreme Court members like the aging Kennedy say they will not retire while Obama is president.
It's not just indifference to good government that's driving the Rs, it's a plan to hold the jobs open for their own candidates.
oldswede

Posted by: oldswede on August 7, 2010 at 10:41 PM | PERMALINK

All Obama has to do to quickly end this stupidity is appoint him during the recess.

END OF STORY!

Posted by: Kevin Schmidt on August 9, 2010 at 7:32 PM | PERMALINK

Gee. It seems that this articles author, Steve Benen, feels the Republicans want to get conservative appointees in the federal reserve and as judges, and he thinks this is obstructionist.

Of course, Democrats want to get liberals appointed to the federal reserva and as judges, and he makes no mention of this.

So, lets state the obviousl. Democrats want liberal Democrats appointed to the fed. reserve, judgeships, etc., etc. AAaaaaaand, Republicans want conservatives appointed.

What a concept. Any new information to provide, Mr. Benen?

Posted by: Joe on December 23, 2010 at 2:01 PM | PERMALINK




 

 

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