Republican lawmakers who now support Shelton’s appointment to one of the most important economic policymaking jobs in the world have struggled to explain why. In damningly faint praise, they admit that sure, she might believe ridiculous things, but she’d serve alongside competent people. So she can’t cause that much damage, right?
To be clear, these lawmakers have generally not endorsed Shelton’s stances.
Perhaps most objectionable is her multi-decade effort to bring back the gold standard. This might be popular among the right-wing fringe, but it was abandoned worldwide long ago and remains almost unanimously rejected by economists. For good reasons, including that gold prices are volatile. Linking the dollar to gold can also restrict liquidity when the economy needs it most — as happened during the Great Depression.
Neither Shelton nor her Senate supporters have adequately accounted for her abrupt about-faces on other beliefs — flips that coincide with her party’s political interests.
For example: When a Democrat was president, she fearmongered about impending “ruinous inflation” and called for higher interest rates even though the economy was 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 the 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 — 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, 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 still hasn’t gotten a vote; yet somehow Shelton is getting jammed through ahead of him.
One possible explanation: a desire to salt the earth for incoming President-elect Joe Biden.
Once a Democrat is back in the White House, Shelton might revive her previous forewarnings about “ruinous inflation” and insist on hiking interest rates. On this she would likely be outvoted, of course. Still, she might cause substantial damage because she may effectively have veto power over emergency lending programs the Fed is using to fight the pandemic recession. This could happen if at least two sitting board members vacate their posts early — which seems quite possible given recent Fed turnover.
Shelton’s confirmation could represent a point of no return for corrupting the mission and functionality of the Fed, and destroying 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 as we recently saw with the partisan effort to confirm Trump’s Supreme Court nominee — and the calls for retaliatory “court-packing” that followed — Democrats may come to resent this sort of unilateral disarmament. An arms race to put increasingly ideological or partisan people on the Fed may not be far off.
I hope I’m wrong — both that Shelton is about to be approved and that her confirmation would escalate efforts to sabotage the job market or price stability while the other party is in power. But if I’m right, a dark new economic era looms.