There are two reasons senators should vote down Judy Shelton’s nomination to the Federal Reserve. The first is her long record, and the second is her recent sprint away from it.
For many years, Shelton tirelessly advocated a gold-backed dollar, 0 percent inflation, and higher interest rates. After the financial crisis, when the U.S. had a prolonged spell of low inflation and high unemployment, she argued that the Federal Reserve’s efforts to foster a recovery posed too great a risk of raising prices. High and variable inflation, such as we experienced in the 1960s, is an evil that the central bank can and should avoid. Regarding inflation as always and everywhere the chief threat to an economy, on the other hand, is an error that can trap economies in depressions. It is an error to which Shelton’s ideology makes her especially prone.
President Trump has very different views. He wants low interest rates, does not worry about inflation, and shows no sign of caring about the gold standard. During his presidency, these views have been right in their practical upshot more often than not. What is worrisome is the extent to which Shelton has echoed Trump’s views without even acknowledging how they differ from the ones she has expressed in the past, let alone explaining her change of mind. She wanted tighter money in the depths of recession a decade ago, and then advocated looser money at the height of a boom. A steep increase in the price of gold, which once would have alarmed Shelton as an indicator of future inflation, has not given pause to her in her current incarnation.
Some of Shelton’s longtime allies advocate her confirmation on the ground that she is just saying what she has to say to win Trump’s approval. Others say the Senate should not fear confirming her, because she would have only one vote — and, what’s more, would bring a diversity of opinion to the Fed. (She has certainly held diverse views.)
The Fed, especially in recent years, has prized collegiality and consensus. If Shelton reverts to her earlier views once confirmed, she might exert a gravitational pull toward a tighter policy than the economy needs. The best argument against that concern is that her recent statements make her unpredictable rather than doctrinaire. That is not a recommendation for a part of the government that requires sober and steady judgment above all.