The Senate Finance Committee voted unanimously last week to send Yellen’s confirmation to the full Senate, with several Senate Republicans on the committee praising her qualifications for the position.
Yellen, 74, spent years as a professor before entering politics as head of President Bill Clinton’s Council of Economic Advisers in the late 1990s. She chaired the Fed from 2014 to 2018, playing a key role in the recovery after the Great Recession. President Donald Trump broke with tradition when he opted not to reappoint her in 2017, instead selecting Jerome H. Powell to lead the central bank.
The Brooklyn-born treasury secretary will try to stabilize an American economy facing its worst crisis in decades. Yellen’s most immediate task will be shepherding President Biden’s $1.9 trillion economic relief package through Congress amid pushback from Republicans and even some centrist Democrats. She will also face a daunting international portfolio that stretches from sanctions on foreign countries to U.S. trade agreements.
Beyond facing the immediate coronavirus crisis, Yellen will play a critical role in Biden’s efforts to reduce income inequality and approve an economic recovery package focused on creating manufacturing and clean-energy jobs that is expected to be introduced next month.
“We are living in a K-shaped economy, one where wealth built upon wealth, while working families fell farther and farther behind,” Yellen said during her confirmation hearing last week. “We have to rebuild our economy so that it creates more prosperity, for more people, and ensures that American workers can compete in an increasingly competitive global economy.”
Yellen will replace Steven Mnuchin, the Wall Street financier who was one of Trump’s closest aides. McConnell voted to confirm Yellen but criticized Senate Democrats for their delay in confirming Trump’s treasury pick four years ago.
“When the American people elect a president, and when that president selects qualified and mainstream people for key posts, the whole nation deserves for them to be able to assemble their team,” McConnell said on the Senate floor on Monday.
Yellen’s confirmation as the first female treasury secretary follows a career of firsts. In 1971, Yellen was the only woman in her class to receive an economics PhD from Yale University. She was also the only female economics professor for part of her time teaching at Harvard University.
That record has inspired generations of female economists in Washington and within the profession itself. Now, as the pandemic disproportionately pulls women from the workforce, in large part because of child-care issues, economists say Yellen’s credentials, and the symbolism of her confirmation, are a timely match.
“One of the deficiencies we’ve seen is when you have homogeneity among a group of policymakers, even when they are well-intentioned,” said Kathryn Judge, an expert on financial regulation at Columbia Law School. “There are certain challenges they’ll be less inclined to see, and therefore less inclined to address.”
Yellen was the first woman at the helm of the Fed, which she chaired from 2014 to 2018.
The unemployment rate was 4.1 percent when Yellen left the Fed, far lower than when she took over. She was also credited with openly raising issues related to inequality in speeches and public remarks. Rather than turning to the unemployment rate alone, Yellen, a labor economist, created a dashboard of various indicators — including the job openings rate and average hourly earnings — to check the pulse of the labor market.
On monetary policy, Yellen has been criticized for raising interest rates from near zero in 2015, with some of the left arguing that the increase slowed the economy prematurely and undermined the Fed’s mission of full employment. At the time, many Fed leaders feared that such low unemployment would, in turn, trigger an unwanted spike in inflation. That approach has since been overhauled by the central bank, which now maintains that interest rates can be kept lower for longer without causing a bump in inflation.
“She understands how distinct this time is for the labor market, particularly for the lowest-wage workers out there,” said Diane Swonk, chief economist at Grant Thornton. “We’ve got a situation for low-wage workers that could cause some very deep scars, and fiscal policy will be required.”