Hmmm: Biden picking fight with progressives over the Fed?

AP Photo/Manuel Balce Ceneta

It seems Joe Biden has found another Donald Trump policy he wants to keep. Given the opportunity to put his own stamp on the Federal Reserve, Biden will instead leave Trump appointee Jerome Powell in place, rewarding the current Fed chair for his work in keeping capital flowing during the pandemic. The White House announced the decision earlier this morning:

President Biden will renominate Jerome H. Powell, the Federal Reserve chair, to another four-year term — ensuring policy continuity at a moment of rapid inflation and vast economic uncertainty but potentially angering progressives Democrats who had been agitating for a change in leadership.

The much-awaited decision was a return to tradition in which the central bank’s top official is reappointed regardless of partisan identity — a norm bucked by former President Donald J. Trump, who appointed Mr. Powell instead of renominating Janet L. Yellen. The stakes in the choice are unusually high. …

Mr. Biden, who will also nominate Lael Brainard, a governor, to serve as the Fed’s vice chair, said he was confident that both Mr. Powell and Ms. Brainard would work to lower prices and keep the economic recovery on track.

It’s a curious choice, and not just because of the Trump connection. The massive dump of cash into the economy has touched off an inflationary wave that Powell will likely have to restrain with higher interest rates, which will yank back on economic growth. That will frustrate Biden allies who want even more government spending in the short run, not to mention those who think the Fed has been far too friendly with moneyed interests and not committed enough to social-justice causes. Biden could have picked a new chair more attuned to progressive tastes, and might have assuaged some harsh feelings over the collapse of the $3.5 trillion reconciliation proposal this fall by doing so.

Instead, as Politico’s Victoria Guida notes, Powell’s reappointment is almost a thumb in the eye to Senate progressives:

But he’ll face intense scrutiny from some Democrats such as Sen. Elizabeth Warren for overseeing a rollback in Wall Street rules, an issue that has sharply divided progressives over whether he deserves a second term, and over a trading scandal that forced two top Fed officials to resign.

The hard-progressive site Common Dreams had reported that two other Senate Democrats had sent out a clarion call for opposition to a second Powell term:

On Friday, Sens. Jeff Merkley (D-Ore.) and Sheldon Whitehouse (D-R.I.) issued a joint statement announcing that they would oppose the renomination of Jerome Powell—a Trump appointee—for a second term as Fed chair.

“Powell refuses to recognize climate change as an urgent and systemic economic threat,” the senators said. “During his tenure, Chair Powell first ignored climate change and then resisted calls for the Fed to use its tools to fight it, arguing that climate change ‘is really an issue that is assigned to lots of other government agencies, not so much the Fed.'”

“Climate is not a long-term challenge for the Fed; it demands action now,” they added. “Climate effects exacerbate supply chain struggles and commodity price volatility… President Biden must appoint a Fed chair who will ensure the Fed is fulfilling its mandate to safeguard our financial system and shares the administration’s view that fighting climate change is the responsibility of every policymaker. That person is not Jerome Powell.”

Sen. Elizabeth Warren (D-Mass.)—who said in September that Powell’s record of weakening Wall Street regulations makes him a “dangerous man”—and progressive House Democrats have also spoken out against the incumbent Fed chair, whose current term expires in February.

This raises a distinct problem for Biden. Is he sure he can get Powell confirmed? If these three vote against Powell, Biden will need three Republicans to bail him out. If Bernie Sanders and other Senate progressives balk at Powell, Biden will need more Republicans than that. One key Senate Republican has already committed to confirming Powell, however:

Democrat Sherrod Brown immediately signaled his support, but Brown is from Ohio and not generally embracing progressivism, at least not openly. Minnesota’s Tina Smith, a progressive non-entity, also declared her support, which is a bit more meaningful in this instance. Presumably Mitch McConnell would rather get another four years of Powell than of a harder-Left Fed chair, so it’s likely that he will quietly drum up enough support for Powell over the next few weeks to at least replace balking Democrats. Powell turned out pretty good for Republicans, after all, or at least wasn’t nearly as problematic as a Fed chair might otherwise have been.

This scenario is unlikely to occur, but there is at least a non-zero chance that a Powell confirmation vote ends in a 50/50 tie. What will Kamala Harris do in that situation — vote to support her boss and trash her prospects among progressives for future leadership? Or vote to oppose, embarrassing her boss to curry progressives’ favor and provide a lasting moment of disloyalty in American political history? After all ….

Although we should never assume competence with Biden and his administration, it seems difficult to believe that the White House would have moved forward on this choice without some indication of success. However, it’s going to create yet another flashpoint within the Democratic coalition between progressives and moderates, and make these caucuses even less able to work together. This will be the result of Biden attempting to sell himself as both progressive and moderate at the same time, setting expectations that were always doomed to failure. Even without the popcorn-passing moment for Harris.