The War On Peter Diamond

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As you read Alabama Senator Richard Shelby’s reasons for refusing to allow a Senate vote on the confirmation of Peter Diamond to the Federal Reserve Board of Governors, keep in mind that Diamond recently won a Nobel Prize:

The top Republican on the Senate banking panel made clear Tuesday that he still opposed the nomination of the M.I.T. professor and Nobel laureate, Peter A. Diamond, to the Federal Reserve calling him an “old-fashioned” Keynesian supporter of big government.

Opposition from Senator Richard C. Shelby of Alabama to a nomination that Republicans have already scuttled twice poses a challenge to President Obama, who must decide how much political capital he wants to spend to push for Mr. Diamond’s approval.

“It is clear to many of us that he does not possess the appropriate background, experience or policy preferences to serve,” on the Fed’s board, Mr. Shelby said of Mr. Diamond.

It’s true that Diamond isn’t a specialist in monetary economics, but this has never been the confirmation standard before. Indeed, as Steve Benen reminds us the Bush administration appointed several non-economists to the Fed board and nobody complained. Diamond, meanwhile, has both a PhD in economics and a Nobel Prize. And while he’s not a monetary policy specialist he does have extensive (indeed, Nobel Prize winning) research in the field of labor markets and the sources of unemployment. Note also that the Federal Reserve has no particular authority over the size of government, so the fact that Diamond is a well-known advocate of Social Security has no clear relevance to this issue.

In terms of political capital, I think this is a place where the metaphor is misleading. Political standing is a renewable resource. Dedicating some attention to the fact that Richard Shelby (JD, University of Alabama) is keeping a key economic policymaking post vacant amidst a severe labor market recession on the grounds that a Nobel Prize winning economist is unqualified is not going to deplete Obama’s store of anything valuable. Obama probably can’t force Shelby to relent, but picking a fight over his unwillingness to permit an up or down vote on this matter would be a nearly optimal way of highlighting a general trend toward obstructionism. Monetary policy is also one of the very most important determinants of Obama’s re-election prospects, so it would be a mistake to slight this.