One of President Donald Trump's nominees to the powerful board of governors of the Federal Reserve System faces a rocky confirmation amid concerns about both the orthodoxy and consistency of her economic views.
Trump nominated Dr. Judy Shelton in January to fill a seat on the currently incomplete Fed board, winning plaudits from free-market conservatives, who saw the longtime monetary economist as a likely ally at America's central bank. But since then, she has faced an uphill battle in Congress.
Shelton made it through a Senate Banking Committee confirmation earlier this month only after tough questioning from three Republican senators. Sen. Richard Shelby (R., Ala.) voiced concerns over Shelton's past support for the gold standard, while Sens. Pat Toomey (R., Pa.) and John Kennedy (R., La.) both pushed her on her support for lower interest rates—an about-face from her previous views.
Since her committee confirmation, Sens. Mitt Romney (R., Utah) and Susan Collins (R., Maine) have said they will join Democrats in voting against her. Romney has not offered reasoning, and his office did not respond to a request for comment, but Collins expressed concerns about Shelton's apparent skepticism of Fed independence. Tennessee's Lamar Alexander (R.) is also weighing whether to back Shelton, while Senate Majority Leader Mitch McConnell (R., Ky.) has not scheduled a full vote.
Should Shelton be confirmed it would mean the elevation to America's central monetary authority of a scholar with surprisingly un-Trump-like views: a belief in tight credit, opposition to currency devaluation, and even sympathy for a North American currency union. That confirmation would be a victory for fiscal conservatives, but not necessarily for Trump's particular brand of economic populism.
Among many conservative economists, Shelton's nomination was greeted with celebration. Stephen Moore, a sometime Trump adviser who has worked with Shelton and was himself briefly considered for the Fed, told the Washington Free Beacon he thought she was "overwhelmingly qualified," adding that "she is going to bring a new perspective which is so urgently needed, because it's just a bunch of groupthinkers that need some fresh perspectives."
That perspective is a fairly doctrinaire free-market conservative position. Moore identified Shelton as an ardent supply-sider and advocate of tight monetary policy—meaning she tends to prefer the Fed keep interest rates high and inflation low. Such views are not unpopular in the halls of conservative think tanks, but less common on the board of the Fed, which Moore said is controlled by a "Keynesian orthodoxy."
Shelton also advocates for conservative views generally considered outside of the economic mainstream, including her vocal support of a gold-backed currency. She's also expressed skepticism of the Fed's practice of aiming for price inflation, arguing that it dangerously erodes consumer purchasing power.
At least, as much was true until recently. Post-nomination, however, Shelton seems to have made a sudden about-face on the less Trump-friendly parts of her worldview.
"Shelton has an extremely long track record of expressing views that are on the extreme tight end of the spectrum of monetary policy thinking," Ramesh Ponnuru, a fellow at the American Enterprise Institute and monetary policy commentator, told the Free Beacon. "They're not the same views as President Trump's, and around the time that she was being considered for a nomination, she reversed course and adopted views that are much more akin to President Trump's."
During her confirmation hearing, Shelton told the Finance Committee that she "would not advocate going back to a prior historical monetary arrangement." As for interest rates, she told the Washington Post after her nomination that she would like to see them cut "as expeditiously as possible."
Asked about the about-face, Moore said that while he had not consulted with Shelton on it, his own thinking on interest rates has recently evolved, given record-low rates not leading to long-predicted inflation. Perhaps, Moore suggested, she has undergone a similar evolution.
Ponnuru, however, argued that Shelton has not offered a satisfactory explanation for her change of views, raising questions about her ability to be independent from the president who nominated her.
"There is a question of: What Shelton are you going to be getting at the Fed?" Ponnuru said. "The extreme tight-money Judy Shelton [or] a nominee who is extremely pliable and responsive to the wishes of political patrons."
Shelton changing her views to get nominated would hardly be unprecedented. What is more surprising is that she earned the backing of a president whose views are, Ponnuru said, "diametrically opposed" to her own.
Trump, the self-described "king of debt," has generally advocated for a looser monetary policy to keep the economy running hot. That's led to a sometimes-contentious relationship with Fed chairman Jerome Powell, whom he has publicly pressured multiple times over the past four years to keep interest rates low. Trump has also pushed Powell to devalue the U.S. dollar to respond to China's currency devaluation—a move that would strongly conflict with Shelton's hard-money views.
Shelton has also taken positions, Ponnuru noted, that have "very little to do with the ‘America First' nationalist agenda" embraced by Trump. In the early 2000s she pushed for an EU-style currency union across North America, with an equivalent "Amero" currency. And she explicitly called for open borders with Canada and Mexico—an opinion popular among supporters at the Wall Street Journal, but not with Trump's base.
Public opposition to Shelton has come largely from those senators, like Romney and Collins, most opposed to Trump's brand of "populist" conservatism. "Trumpier" Senate figures, like Sens. Josh Hawley (R., Mo.) and Marco Rubio (R., Fla.) have been tight-lipped on the nomination. Hawley, in particular, has pushed for the Federal Reserve to more actively manage international exchange rates, something Shelton explicitly repudiated after her confirmation hearing.
One senior Republican Senate aide, speaking on condition of anonymity, told the Free Beacon that there are "definitely concerns about Shelton's dramatically inconsistent views" within the caucus.
"If the crop of Republican senators who say they want to be pro-worker actually mean it, they'll oppose Shelton," the aide added.
That argument typifies the competing economic views—a more free-market conservatism versus a more nationalist one—increasingly in tension in the Trump White House and the Republican Party as a whole. Trump's support, and the inaction from allies in the Senate, suggest that Shelton's nomination may not be perceived as a flashpoint for this dispute. But her confirmation could have a lasting impact not only on the Federal Reserve, but on the shape of conservative economic theory for years to come.