Among many reasons to celebrate — and breathe a sigh of relief — over the Nov. 3 results, this one should not be overlooked: President Donald Trump’s defeat for re-election represents a victory for Federal Reserve independence. To a degree unprecedented in recent years, Trump has openly hectored the central bank for failing to set interest rates low enough to suit him, even when the Fed chair was a man of his own choosing, Jerome Powell. To be sure, the danger of an open showdown between the White House and the Fed abated, essentially by accident, when the coronavirus pandemic delivered a brutal economic shock and objective conditions made it necessary for Powell to set interest rates at near-zero.
Now, though, there is no chance that Trump can resume his attempt at politicization of monetary policy. Populists of the left and right in Congress will probably press their long-standing demands for “audits” and other forms of political intervention — but President-elect Joe Biden has, fortunately, given no sign that he supports such thinking.
The vestiges of Trump’s campaign to tilt the Fed remain, most visibly in the form of his nomination of Judy Shelton, a Republican of modest qualifications and often-eccentric policy views, to the Fed’s board of governors. Shelton’s nomination proved controversial even among GOP members of the Senate. Yet rather than let Shelton’s nomination quietly lapse in the lame-duck session, Senate Majority Leader Mitch McConnell, R-Ky., has indicated that he plans to bring it to the floor this week, suggesting there are at least 50 GOP votes to confirm Trump’s pick, which, plus a deciding vote from Vice President Mike Pence, would be enough to install her in a term that would not end until 2024. If the Senate also confirms Christopher Waller, Trump’s other — well-qualified — choice for a Fed vacancy, the Fed’s board would consist of seven Trump appointees and one holdover Obama nominee, Lael Brainard.
One should not overstate the damage that would result from the presence, as one of seven Fed board votes, of Shelton — an erstwhile advocate of discredited theories such as reinstating a version of the gold standard. Starting with Powell, the rest of the board consists of mainstream thinkers, albeit mainly conservatives with a much less aggressive view of banking regulation than a Biden administration is likely to favor or, indeed, than the country may need.
However, the possible ineffectuality of Shelton’s tenure makes the Republican Senate’s apparent decision to press on with it that much more troubling. It is no longer necessary to appease a departing president; the main benefit to Republicans of filling this seat is to deny the opportunity to the incoming one. It also takes up legislative time and attention that could be better devoted to passing additional fiscal stimulus. Any GOP leader would want to maximize influence pending a Democratic president, but Shelton is a marginal pick and shelving her would have been a relatively low-cost gesture of bipartisan cooperation under Biden.