Yellen could be Biden’s most important pick

Janet Yellen’s nomination as Treasury Secretary was praised by both Wall Street and Elizabeth Warren. That combo won’t last — but Yellen’s other strengths will.

She’ll bring unsurpassed credentials to the job: former Federal Reserve Board chair, head of the White House Council of Economic Advisers, earlier a prestigious academic. She has been the first woman to do so many prominent tasks, fortunately it is no longer noteworthy.

Yellen may prove to be the most important of President-elect Biden’s appointments.

The new national security team is top-flight. This is Biden’s forte. He spent over three decades on the Senate Foreign Relations Committee, 11 years as the top Democrat. He was deeply involved in most every foreign policy arena in eight years as Barack Obama’s vice president.

Biden’s experienced advisers have close ties with him and will be deeply involved in any decisions; they won’t be tutoring him on many people or policies.

That’s also true with legal and labor issues, where Biden has long experience and expertise.

It’s not the case with economic, financial or market issues. Biden usually echoes conventional mainstream Democratic views, actually reflected in his progressive campaign platform.

In an oversimplified sort of political cliche, Yellen is a realistic progressive who — ideologically — will be very much in sync with the president.

A labor economist, she has written and researched extensively on income and gender inequalities. A central banker, she is aware of the risks of financial recklessness. She has warned about the dangers of long-term ballooning debt. It’s more likely in the short term that Biden and his Treasury Secretary, who has called for the necessity of more Coronavirus relief spending, will pay more attention — rightly — to the still sluggish economy and threat of a new recession before the pandemic is fully resolved.

Yellen will be a ten strike in the important area of Treasury-Federal Reserve relations. The country pays a price when that relationship isn’t constructive: most recently, Trump’s Treasury Secretary Steve Mnuchin, after the election, decided to let several Fed emergency lending powers expire — over the objections of Fed Chairman Jay Powell. That contrasts with the late 1990s when then-Fed Chairman Alan Greenspan, a Republican, forged intellectually intimate ties with Treasury Secretaries Bob Rubin and Larry Summers. America’s success in navigating the 2008-09 financial crisis and avoiding a depression was due in large part to the close working relationship between Fed Chairman Ben Bernanke and Treasury Secretaries Henry Paulson and Tim Geithner.

In the first crisis of the Biden administration — there will be one because there always is — Yellen and Powell will be in that latter league. Yellen wanted to be reappointed in 2018; fortunately, for her, Trump declined and instead chose Powell, who he then assailed for the next two years. Yellen and Powell, who said back then that Yellen should have been reappointed, stay in touch. She also is held in high esteem in major financial capitals around the globe.

With or without Democratic victories in Georgia next month, the economic fights on Capitol Hill will be ferocious, especially if Republicans control the Senate. There will be scores of born-again Republican deficit hawks, led by Senate Republican leader Mitch McConnell (R-Ky.) and House Minority leader Kevin McCarthy (R-Calif.) — these Republicans who used to scream about red ink and then fell prostrate and silent as it raged during Trump years will start railing again with Biden.

Janet Yellen won’t dissuade them; the substance of the case will not matter to them. But the credibility she brings to the discussion might make a difference with some lawmakers, the financial and business community, even the public. One of Yellen’s first decisions will be whether she can reverse Mnuchin’s politically-inspired move to end emergency lending programs.

As with any cabinet member, influence depends on getting along with the White House staff, which will consist chiefly of aides with long ties to the president. Yellen never has been a territorial fighter, and the smarter Biden assistants will appreciate the value she brings to the policy decisions and discourse.

Yellen has often testified before Congress, but she hasn’t been deeply involved in heavy political and legislative battles. There will be an exceptional team of economists working with her; she needs to add some with political and communications skills.

Most modern presidents — before Trump — have been well-served by very able Treasury chiefs. Republicans and Democrats alike. That tradition will continue with Yellen.

Al Hunt is the former executive editor of Bloomberg News. He previously served as reporter, bureau chief and Washington editor for the Wall Street Journal. For almost a quarter century he wrote a column on politics for The Wall Street Journal, then The International New York Times and Bloomberg View. He hosts 2020 Politics War Room with James Carville. Follow him on Twitter @AlHuntDC.