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Janet Yellen will lead Joe Biden’s Treasury.

What does she stand for?
Both progressives and conservatives can nd what to like about the former chair of the Fed
Nov 24th 2020

IN THE FIRST instalment of the “Harry Potter” series, the protagonist stumbles
across the Mirror of Erised. Anyone who looks into the mirror sees the “deepest,
most desperate desire” of their hearts re ected back at them. There is a touch of
Erised about President-elect Joe Biden’s decision to nominate Janet Yellen as
America’s next treasury secretary, reported on November 23rd. No economist is
more quali ed than Ms Yellen, a former chair of the Federal Reserve and a respected
academic, for the job. Perhaps more important, however, for what is a political role
as much as an economic one, people from the progresive left to the conservative
right can nd something to like about her.

In today’s political con guration, that matters. Mr Biden must bridge a split in the
Democratic Party between run-of-the-mill centrists and tear-it-down millennial
socialists. And before she becomes treasury secretary, Ms Yellen must be con rmed
by the Senate, which Republicans currently control. That hurdle ruled out
candidates such as Elizabeth Warren, a senator from Massachusetts whom many
Republicans would never con rm because she is seen as too hostile to free markets
and the nancial industry.

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In the days before the announcement Washington insiders believed the race was
between Ms Yellen and Lael Brainard, a governor of the Fed. Some favoured Ms
Brainard on the grounds that she had more expertise in trade economics, others
because she is younger than Ms Yellen, and would therefore do a better job at
balancing out an elderly president. Left-leaning Democrats were particularly taken
with Ms Brainard’s monetary doveishness.

Yet Ms Yellen has many advantages of her own. She is an accomplished economist,
originally specialising in labour economics, and is the president of the American
Economic Association, the eld’s pre-eminent learned society. (There are also few
better liked people in the profession; wonks pop their collars in homage to one of
Ms Yellen’s sartorial quirks.) She was a highly competent chair of the Fed between
2014 and 2018, communicating the central bank’s intentions clearly in advance so as
not to take investors by surprise. She is less likely to get herself into the sort of

scrapes that Steven Mnuchin, Donald Trump’s treasury secretary, has found himself
in. The latest is a tussle with the Fed over the proper direction of economic policy.

The Economist Asks

The Economist Asks: Janet Yellen
27/02/2020 · 28 min · Subscribe · Share

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The genius of choosing Ms Yellen lies in the fact that people of all political
persuasions can nd some reason to cheer her appointment. That means she will
almost certainly be con rmed by the Senate. Take monetary policy. Hawks point out
that on Ms Yellen’s watch the Fed raised rates from near zero to 1.25-1.5%. Doves
counter that hawks were over-represented in the rate-setting panel at the time, and
that Ms Yellen did a good job of keeping them in check.

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It is a similar story on scal policy. Shortly before Mr Trump became president, Ms

Yellen argued that “ scal policy is not obviously needed to provide stimulus to help
us get up to full employment”. She is on the board of the Committee for a
Responsible Federal Budget, an organisation that spends a lot of time warning
people about the dangers of high public debt. Yet during the pandemic Ms Yellen
has argued for “extraordinary scal support”. In June she co-signed a letter arguing
that “Congress must pass another economic recovery package.”

Passing another stimulus bill may be her rst big task. Republicans and Democrats
have been unable to agree on a replacement to the bill passed in April, with
particular disagreement on the size of the eventual package, even as it is now clear
that the economic recovery is slowing. It is a lot to expect that the sheer force of one
person could help break the deadlock, not least because Republicans are likely to
retain control of the Senate for a while yet. But if anyone can do it, it may be Ms
Yellen.

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