Former Federal Reserve Chair Janet Yellen is President-elect Joe Biden’s pick to serve as the 78th Treasury Secretary of the U.S., the Biden transition team announced November 30.
The president-elect made the announcement as part of an unveil for the incoming administration’s economic team, which would include Neera Tanden for head of the Office of Management and Budget, Wally Adeyemo for Deputy Treasury Secretary, and Cecilia Rouse for Chair of the Council of Economic Advisors.
Yellen, 74, will have her work cut out for her, with the U.S. economy in the midst of the deepest economic crisis since the Great Depression. But Yellen’s deep experience with macroeconomics, in addition to her familiarity with the inner workings of Washington, could prove to be useful tools as the Biden administration takes a swing at a fiscal response to the crisis.
If confirmed, Yellen will be the first woman to hold the position, and only the second Fed chair to serve in the role, coming after G. William Miller, who also held both roles.
Her resumé includes 16 years in leadership roles within the Federal Reserve System.
From 2004 to 2010, Yellen served as the head of the Federal Reserve Bank of San Francisco before being tapped by the Obama administration for a role as Fed Vice Chair from 2010 to 2014. She was then appointed to replace Ben Bernanke as Fed Chair and served in that position until 2018 when the Trump administration replaced her with Jay Powell.
Like many former Fed chairs, Yellen has had experience working with fiscal policy through economic roles within previous White Houses. From 1997 to 1999, Yellen served as chair of the White House Council of Economic Advisors, helping to drive policy under the Clinton administration.
Since leaving the Fed, Yellen has worked at the Washington D.C.-based think tank Brookings Institution.
Yellen would be the first person in American history to serve as Fed Chair, Treasury Secretary, and Chair of the CEA.
The Yellen nomination was first reported by the Wall Street Journal November 23.
Spend more?
Yellen was not a formal member of Biden’s economics team during the election, but has been part of a team of advisers who have briefed the president-elect.
Then-U.S. President Barack Obama holds a meeting with financial regulators including former Fed chair Janet Yellen to receive an update on their progress in implementing Wall Street at the White House in Washington March 7, 2016. REUTERS/Kevin Lamarque
The former Fed chair has been vocal about her suggested approach to the COVID-19 crisis, arguing that Congress and the White House should be more aggressive on spending that would keep households and businesses whole through grants.
“When unemployment is exceptionally high and inflation is historically low, as they both are now, the economy needs more fiscal spending to support hiring,” Yellen and Biden chief economist Jared Bernstein wrote in The New York Times on August 24.
Biden’s other picks rounding out the administration’s economic team will have an active role in piecing together a response. Tanden, who would manage the government’s budget if confirmed to lead the OMB, has similarly advocated for more fiscal spending to pull the economy out of recession. Tanden currently serves as the head of the Center for American Progress and was a major player in the creation of the Obama administration’s Affordable Care Act.
Yellen specifically has argued that with interest rates so low, the government should not be afraid of deficit spending in the middle of an unprecedented economic shock.
“This spending is preventing even more of an economic collapse and the more the economy shrinks, the more tax revenues decline. A dollar of spending now doesn't really add a dollar to U.S. debt,” Yellen said in March, after the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
But in the past, Yellen has expressed concern over the longer-run path of the deficit. She has described the pace of government spending as “unsustainable,” telling CNBC in 2018 she would support raising taxes and cutting retirement spending.
Fed policies
As Fed chair, Yellen oversaw the central bank’s first rate hikes out of the Great Financial Crisis. In December 2015, the policy-setting committee raised interest rates with the unemployment rate at 5.0% and inflation undershooting its 2% target.
Fed officials are now saying those early rate hikes may have been pre-emptive. The economy would end up sustaining unemployment rates well below 5% (the headline rate was 3.5% just before the COVID-19 pandemic) without substantial inflationary pressures.
The critique: that the Yellen-era rate hikes may have held back what would have been a faster labor market recovery. Yellen said earlier in the year that hindsight is 2020, but insisted that the rate hikes had not “slammed the brakes” on the economic recovery.
“It would have made a small difference,” she said on September 1.
