Words: Josh Lee
And so it begins. As Donald Trump’s court battles continue to nosedive like slack dominoes, president-elect Joe Biden has started to weave together the threads of his administrative fabric. While Obama alumnus Antony Blinken has been given the nod to serve as secretary of state, the appointment of Capitol Hill stalwart John Kerry as climate tsar signals that the Democrats have serious intentions – at least in the coming four years – to tackle the issue.
But it is Biden’s nomination of Janet Yellen, the former chair of the Federal Reserve, as US treasury secretary that has been most extolled.
If approved by the Senate, the 74-year-old veteran economist from Brooklyn will become the first woman to hold the role in the department’s 231-year history, and her arrival will coincide with one of the most volatile and tumultuous economic periods to date, due to the ongoing public health crisis and subsequent shutdowns. In April, during the first wave of the Covid-19 pandemic, US unemployment reached a postwar high of 14.7% and, although the job market has seen a steady improvement, the overall trajectory has stalled as a result of increasing infection rates, with women and people of colour being hit the hardest.
In her new role, Yellen will not only oversee the federal purse strings, but will also guide Biden on economic, fiscal, tax and trade policies, including rolling out stimulus packages that will provide relief. The administration’s economic focus will also be on building bridges between the US and its primary trading partners, following the souring of rapports owing to Trump’s “America first” canon.
A specialist in labour markets, one of the few women in the male-dominated discipline of economics, a former staffer at the University of California at Berkeley, Harvard and the London School of Economics, and a lead policymaker for three decades, Yellen will bring a hinterland of experience and stability to the Biden White House. A shift away from the chop-change, mercurial approach that has defined the outgoing administration.
Yellen with Rodrigo Vergara
Following years as a renowned professor of economics, and after her first stint at the Fed, Yellen came to national attention in 1997, when, during the Clinton years, she was appointed to chair the Council of Economic Advisers. In this role she led a landmark report into the gender pay gap, with the study’s analysis finding that women earned 25 per cent less than men. Although an improvement on the 40 per cent gap two decades prior, Yellen stated in a news conference at the time: “We’ve come a long way toward greater equality in the pay received by men and women, but there is still too big a gap that remains.”
But it was perhaps between 2014 and 2018, in her role as chairwoman of the Federal Reserve – the first woman to hold the position – that her star shone brightest. She is widely credited, not only for navigating the US out of the horrors and devastation caused by the financial crisis of 2007, but also for the way in which she tilted the spotlight on how inequality and individuals would be affected by banking policies.
In her mic-drop of a final act at the Fed, Yellen left Wall Street jaws agape when she slapped major sanctions on scandal-ridden Wells Fargo, preventing the bank from growing its assets indefinitely, due to what she called “widespread consumer abuses”, including a fake accounts scandal.
Distinguished for her calm, and known for being one of the first federal policy makers to sound the housing bubble, Yellen is venerated among many circles. Businesses and markets trust her. The Dow climbed on news of her nomination. And in a nation whose political polarity has never been more pronounced, Yellen is one of the few figures that appeals to both red and blue, given that she has been confirmed by the Senate four separate times, including in 2014 for Fed chair, where she received 11 Republican votes. She is currently viewed as the safer choice for Biden, as other rumoured names in the frame, including the left-leaning senator Elizabeth Warren, may not have been been so well received by a Senate that is currently held by the opposition. That the current Wells Fargo chief, Charlie Scharf, has backed Biden’s appointment of Yellen despite her history with the bank, underlines the esteem in which she is held.
But not all have taken kindly to the Brooklynite. In September 2016, Trump said that Yellen should be “ashamed” of her actions as Fed chair, arguing that the central bank’s resistance to introducing higher interest rates was done in order to secure Barack Obama’s legacy.
The Federal Reserve Headquarters in Washington, DC. Credit: Creative Commons/AgnosticPreachersKid
A year later, once his against-all-odds victory to the White House had been firmly secured, Trump turned hostile talk into action by going against tradition. Incoming presidents usually allow bank chiefs nominated by their forerunner to remain in position in order to keep their duties separate from politics, a practice established following the Carter years. Trump, however, denied Yellen a second four-year term at the Federal Reserve, instead opting for Jerome Powell. According to one Washington Post article, Trump refused, in part, to hire Yellen, who stands at 5ft 3in, because he felt that she was too short for the position.
Although reluctant to make public remarks about the incumbent president, when asked in early 2019 whether or not she thought that Trump had a “grasp” of macroeconomic policy, Yellen replied, “No, I do not.”
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Since departing the Fed, Yellen has spoken out about climate change, including advocating for a carbon tax system that would reduce greenhouse gas emissions. Recent comments about the US’ reaction to the coronavirus also perhaps indicate what her approach and stimulus packages will look like come 2021.
In July, during a testimony to Congress on how to save the US economy, she called for federal funds to be channeled into state and local governments. “To avoid the recessionary effects of major fiscal cuts by those governments, federal support should be substantial and conditions on the aid should not be overly restrictive,” she said. And, although the US national debt now sits firmly above the $27 trillion mark, balancing the books might not be Yellen’s priority, having stated in the same testimony: “With interest rates extremely low and likely to remain so for some time, we do not believe that concerns about the deficit and debt should prevent the Congress from responding robustly to this emergency. The top priorities at this time should be protecting our citizens from the pandemic and pursuing a stronger and equitable economic recovery.”
Moreover, Yellen’s appointment as the first woman to head the treasury should not be seen as a minor feat, as her past statements signal that tackling economic discrimination – in terms of sex and race – may also be top of her agenda. An absolute coup for Biden given his incoming administration’s mission to make inclusivity one of its founding pillars.
Jerome Powell with governor of the Bank of Canada Stephen Poloz. Credit: G20 Argentina
Three years ago, in a hearing before the House Financial Services Committee, Yellen labelled the wealth gap between races as “extremely disturbing” and, in a speech at an event which covered diversity in the field of economics in 2019, she claimed that, “underrepresentation of women… limits our ability to understand familiar issues from new and innovative perspectives.”
In her position as head of the central banking system during the Obama era, Yellen also prioritised tackling unemployment, which many saw as going beyond the role’s traditional confines. Now, in a period that has been labelled the “she-cession”, in which the economic downturn of the pandemic has hit women the hardest, there is hope that she will put in measures that will see women return to the workplace, as well as introduce policies that will aid those in need of childcare.
With Yellen continuing to push beyond the ceiling, it is apparent that Biden is fulfilling his promise to build a diverse cabinet and inner circle of advisers. On Monday, it was announced that an all-woman senior press team – a precedent in US history – will be overseen by Kate Bedingfield, while other appointments in senior economic posts would see racial barriers fall, with Princeton economist Cecilia Rouse (nominated as chair of the Council of Economic Advisers) and ex-Obama official Wally Adeyemo (Biden’s pick for deputy treasury secretary) set to become, if confirmed, the first African-Americans in their position. Neera Tanden – whose nomination is likely to receive opposition from both sides of the political spectrum – is pegged as the first woman of colour and first South-Asian-American as head of the Office of Management and Budget.
Despite being the lynchpin of the most diverse team of economic advisers in American history, Yellen will still be faced with obstacles in a nation divided – and she won’t be the sole panacea that will remedy the US’ list of ailments. Racial tensions still warp the nation’s moral compass and the invisible virus will continue to dish out the damage.
But, when the time does come for her to be at the wheel of the treasury, Yellen, a barrier-breaking heavyweight who is near the precipice of becoming the only person to have helmed three of the highest economic departments in US politics – will at least have a platform from which she can steer both recovery and progress in the right direction.
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