How Do Markets Price Yellen?
(Bloomberg Opinion) -- President-elect Joe Biden reportedly plans to nominate former Federal Reserve Chair Janet Yellen as the next Treasury secretary. She’d be an impeccable choice. Her breadth of experience in economic policy making, her pragmatic and progressive worldview, and her calm consensus-seeking temperament make Yellen the ideal partner for the president that Biden wants to be, and needs to be.
Yellen would be the first woman Treasury secretary, just as she was the first to lead the Federal Reserve — a job she did with distinction. Many were disappointed when President Donald Trump chose not to appoint her to another term in 2018. She has consistently recognized the limits to what monetary policy can achieve once interest rates have been cut, by necessity, to zero, and has called for fiscal policy to play a stronger role in supporting demand under those conditions. The Treasury secretary is the officer the country needs to make that case, come forward with specifics, and build the necessary support in Congress.
Even though she spent much of her career as a central banker, Yellen’s qualifications as a fiscal policy maker are unsurpassed. She’s a top-flight macroeconomic scholar and led President Bill Clinton’s White House Council of Economic Advisers. She’s universally respected at central banks and finance ministries around the world, which will allow her to play a leading part in rebuilding the economic-policy alliances and systems of cooperation that Trump has wrecked.
Under Yellen, it’s plausible to hope that the Treasury Department will press for an intelligent tax-based approach to fighting climate change. She’s been a member of the Climate Leadership Council, a bipartisan group that has made detailed proposals for a revenue-neutral carbon tax. Asked whether this approach could be politically feasible, she said, “I really don’t know. But I think it is worthwhile to show there can be broad agreement on a policy that is environmentally enlightened.”
A Treasury that stands up for sound economics and seeks broad agreement where possible would be enormously welcome. It’s exactly what the U.S. has lacked for the past four years. An appointment of this caliber will be something to celebrate.
Editorials are written by the Bloomberg Opinion editorial board.