Yellen could win swift confirmation as first female Treasury secretary
Former Federal Reserve chairwoman has won praise from both sides of the aisle; Republicans are wary of tax increases, big spending plans
Janet Yellen, President-elect Joe Biden’s choice to lead the Treasury Department, encouraged Congress to “act big” on a COVID-19 aid package and to target relief where the economy would get “the biggest bang for the buck,” that is, to individuals who need it most, public health and small businesses.
Republicans and Democrats have agreed to expedite Yellen’s confirmation vote, which could go to the floor early as Thursday, according to incoming Senate Finance Chairman Ron Wyden, D-Ore. The Treasury post is considered key to addressing an ailing economy and Yellen has been confirmed by the full Senate five times previously, including as Federal Reserve chairwoman.
At her confirmation hearing Tuesday to become Treasury’s first female secretary, Yellen defended Biden’s proposals for a new $1.9 trillion pandemic relief package along with plans to later raise corporate income tax rates. She also defended Biden's proposal to boost the minimum wage, but was noncommittal on congressional Democrats' push to repeal a $10,000 state and local tax deduction cap.
Yellen’s hearing came four years to the day after outgoing Treasury Secretary Steven Mnuchin’s confirmation hearing and was noticeably less rancorous.
“Dr. Yellen, if confirmed, you can be instrumental in helping generate an environment for bipartisan efforts and reasoned debate,” Senate Finance Chairman Charles E. Grassley said at the hearing’s start.
Still, Grassley, R-Iowa, warned against Democratic plans for raising taxes and large new spending programs. “Now is not the time to enact a laundry list of liberal structural economic reforms,” he said.
Yellen's most recent Senate confirmation came on a 56-26 vote in 2014 to lead the Federal Reserve. While Yellen could be confirmed shortly after her hearing, according to Wyden, Mnuchin was confirmed on a party-line 53-47 vote 25 days after his confirmation hearing in 2017.
Yellen may attract more GOP support since three Republicans — Richard M. Burr of North Carolina, Susan Collins of Maine, and Lisa Murkowski of Alaska — voted for her in 2014 and are still in the Senate. But 18 Republicans still in the Senate voted against Yellen at the time, including Grassley and incoming Senate Finance ranking member Michael D. Crapo of Idaho.
Crapo quizzed Yellen about Biden’s plans to raise the corporate tax rate, which was cut from 35 percent to 21 percent in the 2017 tax code overhaul. Crapo was worried about raising tax rates during the pandemic and the ability of U.S. companies to compete at a higher rate.
Biden has made clear that a corporate tax rate increase would be part of a later package, “not now while the pandemic is really depressing the economy,” Yellen said.
Meanwhile, the U.S. needs to negotiate with other developed countries to end the “race to the bottom” on corporate taxation and through those talks “we would assure competitiveness” of U.S. companies even at a higher tax rate, she said.
Sen. John Thune, R-S.D., said that if Biden’s package is passed, pandemic relief will have added more than $5 trillion to the nation’s debt. He asked Yellen if she was concerned about deficits. “Nobody’s talking about it really in either party anymore,” he complained.
Yellen agreed that “eventually” the federal budget must be put on a sustainable path where spending is far closer to revenues.
“Neither the President-elect, nor I, propose this relief package without an appreciation for the country's debt burden,” Yellen said. "But right now, with interest rates at historic lows, the smartest thing we can do is act big."
Now is not the time to curb spending, a strategy that in the long run “would make it difficult to get back to the growth path we were on," she said.
“We really have to worry about scarring due to this pandemic of workers and the loss of small businesses,” she said.
Yellen defended Biden’s proposal to boost the minimum wage to $15 an hour, noting that in studies of adjacent states where one state raised its minimum wage while the other didn’t, job losses in states raising wages “is very minimal if anything.”
Yellen put off a question from Grassley over whether she supported the Democratic aim to repeal the $10,000 cap on state and local tax deductions in the 2017 tax overhaul. The Joint Committee on Taxation has found that 94 percent of the tax benefits from a repeal would flow to households earning more than $200,000 a year and more than half would go to those making more than $1 million a year.
Yellen said that before making a decision on repealing the "SALT" cap, there should be a study done on what the impact of the cap has been on state and local governments and their abilities to provide services.
'Integrity and ability'
While Yellen may draw support from Republicans, she may not get the kind of bipartisan support she got in an endorsement from eight of the living former Treasury secretaries.
“It is hard to imagine a better prepared nominee to meet this great moment of need than Dr. Yellen,” the group said, citing her lengthy experience, her frequent testimonies before Congress and her “integrity and ability.”
The letter was signed by four Republicans: George P. Shultz, James A. Baker III, John W. Snow and Henry M. Paulson Jr.; and four Democrats: Robert E. Rubin, Lawrence H. Summers, Timothy F. Geithner and Jacob J. Lew.
Yellen headed the Fed from Feb. 3, 2014, to Feb. 3, 2018, when President Donald Trump’s nominee Jerome Powell succeeded her. Trump had interviewed Yellen, first nominated by President Barack Obama, and considered renominating her to the post as had been the norm for previous Fed chairpersons even when there was a change in party between presidencies.
Ben Bernanke, nominated to head the bank by President George W. Bush, was renominated by Obama; Alan Greenspan, first nominated by President Ronald Reagan, was renominated by President Bill Clinton; and Paul Volcker, first nominated by President Jimmy Carter, was renominated by Reagan.
Before chairing the Fed, Yellen was No. 2 to Bernanke when she was vice chairwoman of the Fed board from 2010 to 2014. Her reappointment to the seven-member board was confirmed by the Senate by voice vote, as was her confirmation as vice chairwoman.
And she had been one of the board’s seven members in the mid-1990s after being confirmed 94-6 by the Senate. One current Republican senator voted for her then: Mitch McConnell of Kentucky. McConnell did not vote in Yellen’s 2014 confirmation as Fed chairwoman.
In between, she was chairwoman of the White House Council of Economic Advisers under Clinton during his second term, a position to which she was confirmed by voice vote. Yellen later became CEO of the Federal Reserve Bank of San Francisco.