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Economics Nobel winner still faces confirmation hurdles

By the CNN Wire Staff
  • Peter Diamond won a Nobel Prize for his research on unemployment
  • President Obama nominated him to the Federal Reserve Board
  • Republicans have blocked his confirmation

(CNN) -- A Nobel Prize-winning economist who President Barack Obama nominated to the Federal Reserve Board says he understands why despite his accolades the position is out of his reach, at least for now.

Senate Republicans have blocked the confirmation of Peter Diamond on the grounds that he lacks experience, and, in the words of Sen. Richard Shelby, R-Alabama, would be "learning on the job."

"I was warned right at the beginning that this is a process that is unpredictable in how long it will take, and what the outcome will be, and that's what I should expect," the MIT professor said Sunday on CNN's "Fareed Zakaria GPS."

Despite the political hurdles, Diamond said it's a job he would "love to have."

The Fed's seven-member board of governors is a presidentially appointed federal agency that is currently chaired by Ben Bernanke. A full term is 14 years.

Diamond, who along with two others won the Nobel Prize in economics this month for research into unemployment, was nominated for a partial term that would end in 2014.

In his view, the current focus on the high unemployment rate should not be on the labor market, which is not doing badly, but on low demand for labor.

The government did well in taking steps to prop up labor demand, Diamond said.

The first was the original stimulus package, and the second were the efforts to unfreeze credit flows in the aftermath of the financial crisis, he said.

Unemployment today "would've been vastly higher if the government didn't act to get some of these credit flows back functioning," he said.

Reducing unemployment, however, is a slow process, he added.

"I view the U.S. economy as extraordinarily adaptive," Diamond said, citing how historically the economy adapted to previous technological advances thought to permanently increase unemployment, such as the automobile or the steam engine.

On the question of the Bush-era tax cuts, Diamond said that in the short run, he supported preserving at least some of the tax cuts. He did not specify if he advocated keeping the tax cuts for the middle class while repealing them for the wealthy, as the Obama administration has promoted.

In the long run regarding the tax cuts, Diamond said he favors flexibility by not making any of the cuts permanent.