Biden Goes With Safe Fed Pick Over Nod To Progressives In Face Of Inflation Threat

The renomination of Jerome Powell also returns Joe Biden to his roots as an economic moderate.
President Joe Biden speaks as Federal Reserve Board Chair Jerome Powell (left) listens during an announcement that Biden is nominating Powell to a second term.
President Joe Biden speaks as Federal Reserve Board Chair Jerome Powell (left) listens during an announcement that Biden is nominating Powell to a second term.
Alex Wong via Getty Images

WASHINGTON ― President Joe Biden on Monday cited the need for stability and bipartisan appeal amid persisting inflation and a not-yet-vanquished pandemic as reasons for giving Federal Reserve Chair Jerome Powell a second term, rejecting calls from progressives for someone more in line with their politics.

“Some will no doubt question why I’m renominating Jay, when he was the choice of a Republican predecessor. Why am I not picking a Democrat? Why am I not picking fresh blood, or taking the Fed in a different direction?” Biden said, explicitly stating his desire to depoliticize the central bank.

“Put directly, at this moment of both enormous potential and enormous uncertainty for our economy, we need stability and independence at the Federal Reserve,” Biden said during brief remarks at an auditorium in the Eisenhower Executive Office Building across a driveway from the West Wing. “I believe Jay is the right person to see us through.”

Many progressives, including Massachusetts Sen. Elizabeth Warren, had wanted Biden to choose current Federal Reserve Board of Governors member Lael Brainard, who was previously a Treasury Department undersecretary in the Barack Obama administration, an economic adviser in Bill Clinton’s White House and has taught at MIT’s Sloan School of Management.

Instead, Biden nominated Brainard for the vice chair position. “She’s done pioneering work on how the Fed should account for the emerging risk of climate change to our financial system,” Biden said.

Both Powell and Brainard reflected on the reality that many Americans see rising costs as a threat to their economic security, despite months of White House officials projecting confidence that higher prices would be “transitory” as the global economy came out of the pandemic-induced recession.

“We know that high inflation takes a toll on families, especially those less able to meet the costs of essentials, like food, housing and transportation,” Powell said. “We’ll use our tools both to support the economy and a strong labor market, and to prevent higher inflation from becoming entrenched.”

“This means getting inflation down at a time when people are focused on their jobs and how far their paychecks will go,” added Brainard.

Biden also cited Powell’s willingness to adhere to a policy prioritizing maximum employment, despite repeated attacks by former President Donald Trump who wanted him to maximize stock market levels and keep interest rates near zero.

“In the last administration, he stood up to unprecedented political interference and in doing so successfully maintained the integrity and credibility of his institution,” Biden said.

In 2018, Trump refused to renominate then-Chair Janet Yellen ― at least in part because she is not tall, and Trump is disinclined to like short people ― and chose Powell over conservative Stanford economist John Taylor. But Trump not long afterward soured on Powell for not doing enough to ensure Trump’s reelection. He attacked Powell both in public remarks and in Twitter posts, at one time comparing him to China’s authoritarian leader, Xi Jinping. “My only question is, who is our bigger enemy, Jay Powel or Chairman Xi?” Trump wrote in 2019, misspelling Powell’s name.

Biden’s administration has overseen a COVID-19 vaccine drive that has successfully inoculated the vast majority of American adults, with a resulting growth in the economy and a reduction of the unemployment rate to 4.6% now compared with 6.3% when he took office in January.

His poll numbers nevertheless began falling in the summer, coinciding with a disastrous withdrawal from Afghanistan and a surge in coronavirus cases thanks to the spread of the delta variant and the refusal of many Americans to get vaccinated.

Biden spent nearly eight minutes Monday prior to ever mentioning Powell’s name pointing out the strength of the economy on his watch, including the return of 5.6 million jobs lost during the pandemic and a spike in the creation of small businesses.

“We’ve gone from an economy that was shut down to an economy that is leading the world in growth,” he said.