Peter Diamond withdraws Fed nomination

By Laurie Bennett

June 6, 2011 at 7:49am

It’s hard not to sound elitist when you’re an MIT professor with a Nobel Prize in economics.

And it’s hard not to sound whiny when you’re nominated to the Federal Reserve Board, encounter opposition, withdraw, and go back to the cozy world of academia.

In his op-ed column yesterday in The New York Times, Peter A. Diamond actually wrote, “Don’t worry about me.”

Republicans who opposed Diamond must have loved it. Elite, whiny and overeducated are favorite labels of the right for the Obama White House.

At the same time Diamond is rejected, a potential presidential candidate who doesn’t know tPaul Revere from Benedict Arnold is embraced. Go figure.

But Diamond makes some strong points.

Partisanship isn’t the only reason that GOP senators blocked him, he says. Legislators also fail to understand that monetary policy should be shaped by analysis of unemployment.

“If much of the unemployment is related to the business cycle — caused by a lack of adequate demand — the Fed can act to reduce it without touching off inflation,” he writes. “If instead the unemployment is primarily structural — caused by mismatches between the skills that companies need and the skills that workers have — aggressive Fed action to reduce it could be misguided.”

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