THERE’S A SIGH OF RELIEF: A TRUMP NOMINEE FAILED CONFIRMATION

 

             …Ms. Judy Shelton is sometimes referred to as “an unqualified quack”

 

Was Ms. Shelton nominated for “salting the earth” for President Biden?

 

What do you think of when you hear the following that is the so called “praise” of some prominent Republican lawmakers for a Trump nomination to the board of the Federal Reserve?  The praise goes something like this: “She might believe ridiculous things, but she’d serve alongside competent people. So she can’t cause that much damage, right?”

No kidding…that’s what the Republican lawmakers had to say about Trump’s nominee for the Fed, Ms. Judy Shelton.

Now, what’s even more disturbing is that her nomination has been condemned by hundreds of economists, along with former Fed Reserve alumni, including some prominent Republicans, and at least seven Nobel laureates.

Fortunately, the Senate did vote on her nomination this week.  And because three Republican senators also thought Ms. Shelton was an “unqualified quack”, they joined with the Democrats and she lost her nomination by one vote.

Those Republican lawmakers who supported Shelton’s appointment to one of the most important economic policymaking jobs in the world, now they don’t have to answer as to why they wanted someone that was so unqualified.

Actually, Ms. Shelton was dismissed by a former Republican Senate Banking Committee aide, as he said that: “The idea of even calling her as a witness for something was beyond the pale”

To be fair, most of the lawmakers have generally not endorsed any of Shelton’s stances.

Perhaps, most objectionable is her multi-decade effort to bring back the Gold Standard. This might be popular among some of the right-wing fringe, but it was abandoned worldwide long ago and it remains almost unanimously rejected by real economists.  That’s all for good reasons, including that gold prices are highly volatile.  Linking the dollar to gold can also restrict liquidity when the economy needs it most, as did happened back during the Great Depression.

Neither Ms. Shelton nor her Senate supporters have adequately accounted for her abrupt about-faces on other beliefs.  And her flips coincided with her party’s political interests.

As an example: When a Democrat was president, she fear-mongered about impending “ruinous inflation” and called for higher interest rates, even though the economy was very weak.  The Fed, quite responsibly, ignored her.  Then, once Trump was elected, she called for cutting interest rates “as expeditiously as possible,” even while the economy was strong.  Likewise, pre-Trump, she accused the Fed of nefariously weakening dollar to boost exports; under Trump, she agreed with the president that the Fed should weaken the dollar to boost exports.

She has also questioned whether the Fed should even exist.  This was of course, before she was nominated to serve on its board.

Senate Republicans have confirmed other unqualified cranks to senior Trump administration jobs, including to helm departments that nominees themselves earlier said shouldn’t exist. But both parties have long seen the Fed as too important to the domestic and global economies to politicize.

A central bank requires political independence, real and perceived, just to function, as events in Argentina and pre-Euro Italy have amply demonstrated.

The four sitting Fed officials appointed by Trump and confirmed by the Senate are all knowledgeable, apolitical professionals.  And when Trump tried last year to appoint a couple of partisans to join them, GOP senators admirably blocked the nominations.

It’s unclear why Republicans are lowering the bar now, in the midst of a historic economic crisis.  Another pending Fed nominee, Christopher Waller, is qualified for the job and but still hasn’t gotten a vote; yet somehow Shelton was getting jammed through ahead of him.

One explanation is the Republicans desire to salt the earth for incoming President-elect Joe Biden.

Once a Democrat is back in the White House, Shelton might have revived her previous forewarnings about “ruinous inflation” and would insist on hiking interest rates. On this she would likely be outvoted, of course.  Still, she could have caused substantial damage because she might have had veto power over emergency lending programs the Fed is using to fight the pandemic recession.  This could have happened if at least two sitting board members vacate their posts early, which seems quite possible given recent Fed turnover.

Shelton’s confirmation could have represented a point of no return for corrupting the mission and the functionality of the Fed.  It could destroy whatever bipartisan resolve remained to not tank the economy for political gain. For the past several years, many on the left have agitated for more monetary and fiscal stimulus, even though a stronger economy might have boosted Trump’s reelection chances.

But thankfully, there will again be a qualified president in the White House.

Copyright G. Ater 2020