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Biden put on his mask after presenting his picks for his foreign policy and national security team.
What Kind of Treasury Secretary Janet Yellen Will She Be?
Biden’s long-awaited appointment of Yellen as Secretary of the Treasury has generally been greeted with satisfaction from all walks of life, winning praise from business leaders and financiers as well as progressive policymakers.
Yellen served as Federal Reserve Chairman during the Obama and Trump administrations and would bring decades of experience to her post, as well as a reputation for seriousness and thoroughness. And, as a senior correspondent in economics Neil Irwin writes in an analysis for The Upshot, “She’ll need every ounce of these qualities” as she seeks to pull the economy out of a pandemic recession.
Neil agreed to answer a few questions about Yellen and how she would likely approach the role.
We live in a time of deep partisan divisions – which often means a deadlock in Congress. How much power would Yellen have as Secretary of the Treasury to help support economic recovery, with or without legislative assistance?
The biggest thing Yellen can do unilaterally as Secretary of the Treasury is to take a different stance than his predecessor, Steven Mnuchin, on how restrictive the design of joint Fed and Treasury lending programs is. The Mnuchin Treasury insisted that these programs be structured to limit potential government losses, but this made them less effective and less attractive to businesses. Treasury Yellen will likely take a different stance.
Beyond that, Treasury Yellen will have some power at the margins to try to interpret fiscal and regulatory policies in a way that promotes the recovery, but it will need a lot of help from Congress to really do the things it does. economists deem it necessary to help the economy through the winter and the period of widespread vaccine availability.
While the Fed is concerned with monetary policy – that is, the flow of available money into the economy – the Treasury Department is more concerned with fiscal policy, which has to do with taxes and expenses. Do we have any idea how Yellen will approach tax matters?
Yellen is certainly comfortable with ambitious spending plans and high short-term budget deficits as the country tries to emerge from the pandemic-induced crisis. And she firmly believes that the government has a crucial role to play in helping workers. But she’s more concerned with long-term budget deficits than some on the left. She is worried about long-term rights spending and believes that public debt can weigh on growth.
In the short term, crafting a response to the pandemic, it doesn’t matter, but in the medium term, she may well end up as a voice of budget restraint against the left flank of the Democratic Party.
While administrations change in January, Jerome Powell will remain Fed chairman. What does Yellen’s relationship look like with him, and to what extent will he serve as a source of stability and continuity?
Yellen and Powell know each other very well and have great mutual respect. During her time in charge of the Fed, Powell was an influential Fed governor, Yellen’s ally on most issues, and someone she had put oversight of much of the workings to. of the work done by the Fed.
They might have some philosophical differences, but I think they will be very effective collaborators in trying to make sure that these different branches of government are pushing towards the same goal.
And while Powell is politically more conservative than he is, they share a very pragmatic tendency and a feeling that getting the right answer is more important for the American economy than ideology.
As you write in your story, a lot of the responsibility of the Secretary of the Treasury also has to do with foreign policy and how the United States interacts with its trading partners. What do we know about the challenges Yellen will face, especially with regard to the U.S. rivalry with China – and do we have any idea how she will approach those challenges?
This is one of the areas where we know less about what Yellen will do. As chairman of the Fed, you really play the supporting role when it comes to defining the terms of America’s economic relations with other great powers like China. It really is the purview of the Secretary of the Treasury, the Secretary of State, and ultimately the President.
Today, the relationship between the United States and China is more inherently hostile than it was under the chairmanship of the Yellen Fed. She will have power over certain areas of this relationship that she has never really touched before, such as the Treasury body that controls whether foreign interests should be prohibited from owning businesses in the United States for reasons of national security. . (This is the mechanism by which the Trump administration forces divestment from TikTok.) Yellen knows the economic relationship as well as anyone, but even after covering it for a long time, I’m not sure how she will approach the aspects. geostrategic. things.
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