President-elect Joe Biden announced Monday that he plans to nominate former Federal Reserve Chair Janet Yellen for Treasury Secretary. It would be hard to find any candidate for Secretary of the Treasury who commands as much respect on Wall Street as she does in academia but Yellen is exactly that person.
Yellen first made a name as an academic economist specializing in labor market issues and macroeconomics. She was a professor at Harvard and U.C. Berkeley during her time in academia and was then appointed to the Federal Reserve’s Board of Governors. Eventually, she rose to become Vice Chair of the Fed and then Chair in 2014.
During her tenure as Chair of the Fed, she oversaw the successful unwinding of the various extreme policies taken in the aftermath of the 2009 financial crisis and earned a reputation as someone who takes a data-driven non-ideological approach to central banking.
She won the approval of most of Wall Street as well as internationally during this time, and her appointment as Treasury Secretary has been met with approval as well.
BIDEN PICKS YELLEN FOR TREASURY SECRETARY, DEMOCRATIC OPERATIVE TANDEN FOR OMB DIRECTORHowever, what is equally important is that her policy views encompass not just the capital markets but also the economy as a whole and in particular the hardships suffered by the labor force during the current coronavirus pandemic.
Here, she takes what is in fact a very centrist view of what is needed in this moment though it will likely raise the hackles of more doctrinaire conservative politicians. – In short, she has said publicly that the U.S. needs to “continue extraordinary fiscal support” in order to cushion the effects of the pandemic.
It is this willingness to promote a strong fiscal response in 2021 that makes her the perfect choice at this moment.
There is no question that recovery can be significantly accelerated with appropriate fiscal stimulus -- not only do the millions of unemployed need it but restoring a healthy growth trend next year will require it if we are to quickly repair the damage done to small businesses, state and local governments, and individuals who are struggling to make ends meet.
Candidates for a fiscal response are easy to imagine – not only will direct pandemic relief be essential but longer-term needs such as infrastructure investment, a rebuilding of the public health system and help for our schools, among other things.
Many readers will say at this point that such a plan would likely face opposition in Congress and there is no doubt it would be hotly debated. But there are few better spokespeople for such a job than Janet Yellen. It would be difficult to paint her as an extremist when she has a long history of being anything but.
Yellen thoroughly understands the need for a strong fiscal response and can do a good job explaining to the public as well as to observers on Wall Street and elsewhere. And on this, she has the backing of the majority of professional economists (or at least those not on some politician’s payroll).
Finally, at age 74 she is not looking for ways to pad her resume for her next step up the ladder. Unlike many candidates for her new job she already has all the stature anyone in the economics profession could hope for and can be counted on to try to do what is needed for the economy to grow.
She will be a truly excellent Secretary of the Treasury.
Steven Kyle is an associate professor of applied economics and policy at Cornell University's SC Johnson College of Business. He works in the areas of macroeconomic policy, both in the U.S. and in low-income countries.