Peter Diamond, the Nobel Prize winning economist who President Obama nominated to the Federal Reserve Board of Governors, has officially withdrawn his nomination after more than a year of obstruction from Senate Republicans. He explains his decision in a New York Times editorial:In April 2010, President Obama nominated me to be one of the seven governors of the Fed. He renominated me in September, and again in January, after Senate Republicans blocked a floor vote on my confirmation. When the Senate Banking Committee took up my nomination in July and again in November, three Republican senators voted for me each time. But the third time around, the Republicans on the committee voted in lockstep against my appointment, making it extremely unlikely that the opposition to a full Senate vote can be overcome. It is time for me to withdraw, as I plan to inform the White House.
In this instance, blame is a two-way street; on one end, Republicans were responsible for blocking the nomination. In particular, Alabama Senator Richard Shelby attacked Diamond's academic credentials and disparaged his expertise in unemployment and labor, declaring him unfit for the Federal Reserve because of his limited experience with monetary policy. On the other end, Democrats refused to move forward with Diamond's nomination, wasting the 59-seat majority they maintained through last December, and treating Republican objections as sacrosanct, despite their obvious partisanship (during the Bush administration, Republicans supported a nominee who lacked both credentials and research in economics).
President Obama also deserves a large share of blame; he took a full year before he chose to fill this vacancy on the Federal Reserve Board of Governors, despite its importance to setting economic policy. More broadly, Obama has ignored vacancies in the courts, the executive branch and the Fed, and slow-walked important nominations, leaving nominees to flail against Republican opposition and Democratic indifference. By contrast, President Bush took an active role in confirming his nominees, pressuring Congress and taking his case to the public. There's no guarantee that this would have been effective for Obama, but, given the stakes, trying wouldn't have hurt.
For now, we should lament Diamond's absence from federal policy making. Diamond won his Nobel Prize for research into labor markets and unemployment. With job growth sluggish and unemployment at 9.1 percent, Diamond would have been an invaluable member of the Federal Reserve, balancing the board's conservatives, and pushing it to toward further monetary stimulus.
The current right-leaning Federal Reserve is one that won't intervene to reduce high unemployment, and the right-leaning judiciary is one that will continue to rule in favor of business interests and concentrated power. Obama's indifference to nominations stands as the biggest unforced error of his presidency, and one with far-reaching implications.
