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David Mark As prices rise, Biden keeps Jerome Powell at the Fed in a bid at stability — and a political payoff

Biden is reasserting himself on the economy by renominating Powell and keeping his distance from Democrats' left flank, which only appeals to a small segment of voters.

President Joe Biden spent much of the fall fighting with his party’s left wing in Congress. They sparred constantly over the size and scope of spending bills key to Biden’s agenda, and the prolonged internecine fights contributed to the president’s plummeting approval ratings.

Now Biden is in another fight with some progressives, this time over his decision Monday to reappoint Federal Reserve Board Chair Jerome Powell. And the battle has the potential to restore Biden’s luster as the pragmatic problem-solver he claimed to be in his winning 2020 campaign against President Donald Trump.

Biden’s decision to reappoint Powell for a second four-year term means keeping a prominent official from Trump’s administration with whom prominent Democrats have significant policy differences. Most vocally and consistently, Sen. Elizabeth Warren of Massachusetts has argued for months that the Fed under Powell took action to weaken oversight of banks. She and her allies had pushed for a stronger regulator.

Despite these complaints, the Senate is highly likely to confirm Powell’s renomination. Warren’s opposition doesn’t even have the support of the entire progressive wing. Senate Banking, Housing and Urban Affairs Chair Sherrod Brown, D-Ohio, a stalwart progressive, on Monday praised the Fed’s efforts under Powell to work toward full employment. House Speaker Nancy Pelosi, D-Calif., similarly lauded his steady hand during the pandemic, even though she doesn’t have a vote on his confirmation.

Steadiness is surely important to financial markets, which crave stability and predictability. Powell’s reappointment ensures continuity at a time of rising inflation and uneven economic recovery from the pandemic. In his nearly four years helming the Fed, Powell has, in his own estimation, kept the nation’s central bank focused on its traditional mandates of keeping prices stable while pursuing maximum employment.

Powell also showed himself to be admirably impervious to political pressure from Trump. Trump frequently taunted Powell for doing too little to stimulate the economy as his 2020 re-election bid approached, including by cutting interest rates more aggressively. But Powell held firm. He refused to bend under pressure and sought to shield the Federal Reserve as an institution from Trump’s wrath, emphasizing its independent role.

Powell, who made his fortune in private equity, does have his critics, such as Warren, who called him a “dangerous man to head up the Fed” to his face at a Banking Committee hearing in September. Still other Powell critics, including Democratic Sens. Jeff Merkley of Oregon and Sheldon Whitehouse of Rhode Island, say the Fed under him hasn’t aggressively used its financial tools to combat climate change.

But the criticism could help Biden politically. Prevailing against his recalcitrant party members on the left shows he isn’t hostage to them, allowing him to play the sensible centrist as he keeps a steady economic hand in place as inflation worsens. Indeed, Warren may prove a useful political foil as Biden strives to improve his standing with voters ahead of the 2022 midterms and his presumed 2024 re-election campaign.

Biden’s approval ratings have slumped in recent months for several reasons, starting with the messy withdrawal of U.S. forces from Afghanistan. The toxic Capitol Hill fight over his spending bill then took place as prices for food, gas and other everyday items rose at rates not experienced in more than 30 years. According to one recent poll, only 41 percent of voters found Biden capable of leading the nation, compared to 55 percent who thought he wasn’t.

Amid all of this, Democrats took a drubbing in recent off-year elections at least in part because of perceptions that the party had moved too far left. New Jersey Democratic Gov. Phil Murphy just eked out a second term in a deep blue state, while Democrats lost the Virginia governorship for the first time in 12 years. In that race, Republican Glenn Youngkin convinced voters that Democrats were pushing a dangerously “woke” education agenda and other left-wing priorities.

CNN’s Virginia exit poll found that about half of voters said the Democratic Party is too liberal, while about 46 percent said the Republican Party is too conservative. And according to a Washington Post-Schar School pollin Virginia, likely voters disapproved of Biden’s job performance by 53 percent to 46 percent.

Now Biden is reasserting himself on the economy by renominating Powell while keeping his distance from his party’s left flank, which appeals to just a small segment of the population. It has made life on Capitol Hill quite difficult for him at times, particularly the six far-left House Democrats who voted against his $1.2 trillion infrastructure law, forcing him to rely on a smattering of Republican lawmakers to push through one of his top priorities.

To be sure, Biden knows he can’t completely forsake his party’s most left-leaning factions. After all, they bring important organizing energy, and any president would be loath to disregard their most fervent supporters. Biden clearly had progressive pushback against Powell in mind when he simultaneously announced the nomination of Lael Brainard, a member of the Fed board, to be vice chair.

Brainard has in recent years focused extensively on economic risks associated with climate change. And Powell and Brainard together have “advanced key priorities the president shares, like addressing the financial risks posed by climate change, and staying ahead of the emerging risks to our financial system,” the White House said in a statement Monday.

But Biden and his advisers are also all too aware that he knocked Trump out of the White House after one term by running as a moderate problem-solver, not an ideologue. Some Democrats hope he repositions himself that way after a tough election cycle earlier this month. “Nobody elected him to be FDR, they elected him to be normal and stop the chaos,” Rep. Abigail Spanberger, a centrist Virginia Democrat, said after Election Day.

Distancing himself from Warren, an embodiment of the congressional hard left, on a nomination for which Biden otherwise has strong support in Congress isn’t a bad place to start.