Treasury pick hits GOP resistance
Ex-Fed chief Yellen urges legislators to ‘act big’ on stimulus
Janet Yellen encountered early Republican resistance to President-elect Joe Biden’s $1.9 trillion covid-19 relief plan in her confirmation hearing to become treasury secretary Tuesday, as she sought backing for what she described as vital support for the economy.
“It would be a false economy to stint” on covid-19 relief, Yellen told the Senate Finance Committee. She highlighted that, with government bond yields historically low, U.S. debt-interest payments as a share of the economy are lower today than before the 2008 financial crisis.
Yellen said that help for the unemployed and small businesses would provide the “biggest bang for the buck,” and urged lawmakers to “act big” in efforts to rescue an economy battered by the coronavirus.
Republicans are already balking at Biden’s vast stimulus plan, unveiled last week, over its size and components including long-standing Democratic goals such as raising the minimum wage to $15 an hour and expanding family and medical leave.
“Now is not the time to enact a laundry list of liberal structural economic reforms,” Sen. Charles Grassley, R-Iowa, said in his opening remarks. He noted that Congress just approved a $900 billion pandemic relief bill in December. He pointed to criticism that Biden’s proposal isn’t well targeted, and said, “It is important to focus efforts on pandemic relief.”
South Dakota Sen. John Thune, the No. 2 Republican in the chamber, asked Yellen “when is it too much” with regard to running up debt to finance increased government spending.
“It’s essential we put the federal budget on a path that’s sustainable,” Yellen said, but the situation will be worse if investments aren’t made now to support economic growth.
“There is an advantage to funding the debt especially when interest rates are very low by issuing long-term debt,” Yellen also said. Asked about whether she’d endorse a debut 50-year bond, she said she would look at “what the market would be like for bonds of that maturity.”
Yellen also faced questions from Sen. Mike Crapo, R-Idaho, who is set to become the top Republican on the finance committee, about the possibility that Biden would raise taxes.
Yellen said he would take no such steps while the pandemic is underway “and really depressing the economy,” but confirmed that in the future Biden intends to try to repeal parts of the 2017 tax law that helped the highest-income Americans and large corporations.
Among other topics Yellen addressed in the hearing:
■ While not specifically endorsing the “strong dollar” policy established in the 1990s, she said the U.S. “does not seek a weaker currency to gain competitive advantage.”
■ Analysis of states that increased the minimum wage shows that job losses are “minimal, if anything.”
■ The Biden administration is prepared to take on China’s “abusive” trade and economic practices, she said. “China is undercutting American companies by dumping products, erecting trade barriers and giving illegal subsidies to corporations.”
Sen. Ron Wyden, D-Ore., who will helm the panel when his party assumes control later this week, said his top priority is “avoiding the mistake the Congress made in the last recession — taking a foot off the gas pedal before a recovery took hold.”
Wyden also said that he wants to see Yellen’s confirmation proceed “as soon as possible,” given the state of an economy beset by the pandemic. Grassley, the outgoing chairman of the panel, told reporters he expected the confirmation would be “within” the timeline of outgoing Treasury Secretary Steven Mnuchin’s. Mnuchin was sworn in Feb. 14.
YEARS AS FED CHIEF
Most GOP lawmakers who publicly commented on Biden’s November announcement to appoint her as treasury secretary were supportive. Yellen built relationships with lawmakers on both sides of the aisle when she served as Federal Reserve chairwoman for four years, to February 2018.
“Yellen brings immediate credibility and as we know, credibility is everything in these top jobs,” said Tim Adams, who served as a Treasury Department undersecretary during the George W. Bush administration and now heads the Institute of International Finance.
Yellen told the panel that she’ll be working with the Biden team on a second anticipated economic package “to get through these dark times.”
Yellen, who specialized as a labor economist early in her career, said the recession has “disproportionately hit the service sector and the workers who are employed in that sector — and it’s been particularly brutal in its impact on minorities and women.”
TWO FIRSTS
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. As head of the Federal Reserve from 2014 to 2018, she played a key role in the economic recovery from the 2007-2009 recession with a studied approach that helped push down the unemployment rate over time. President Donald Trump broke with tradition when he opted not to reappoint her to the top Fed job.
She was the first woman to chair the Fed and will become the first female treasury secretary if confirmed by the Senate.
Before the hearing, Yellen had reported in a financial disclosure form that she earned more than $7 million in speaking fees from large corporations, including Goldman Sachs, in the two years since leaving the Federal Reserve. She pledged in a filing to the U.S. Office of Government Ethics to seek written authorization from ethics officials to participate in matters involving firms from which she’d received compensation.