Her colleagues compare her to Mary Poppins: friendly but firm, very intelligent and perfectly organized. The Minister of Finance always arrives at the airport hours in advance. She considers all possible questions before a press conference and has practiced for a long time perfecting her official signature on the banknotes. “His approach in life is to plan and prepare for all eventualities”, summarizes Jon Hilsenrath, author of a recent biography.
And it succeeds: at 76, Janet Yellen is one of the most powerful women on the planet. She has had a huge influence on the US and global economy for more than 20 years, having served as chief White House economist, then chair of the Federal Reserve and finance minister since the election of Joe Biden. He is the only person to have ever occupied the three most important economic positions in an administration. “Yellen has been at the center of the financial universe for a generation,” writes Larry Summers, Bill Clinton’s former economy minister, who praises “his integrity.”
She is about to face a tough battle. Congress must periodically authorize raising the debt ceiling, the maximum amount the country can borrow to continue financing its spending. It is established today at… 31,000 billion dollars. For a long time this increase was a simple routine. But for more than ten years, elected Republicans have used it as a means of pressure to extort concessions from the administration. It has therefore become a political showdown that is making the markets nervous. This time, the Conservatives are demanding billions of dollars in budget cuts to Joe Biden’s reforms, including his big “Climate” plan. The White House refuses budget negotiations until the ceiling has been raised. “It’s all ridiculous. Congress has already approved the spending. And the Republicans aren’t ‘seriously interested in deficit reduction because they don’t plan to cut pensions and health insurance,’ says David Wessel. , finance specialist at the Brookings Institution, a think tank.
The risk of a debt default
So far, the two parties have always ended up finding a compromise in extremis. But everyone has in mind the fiasco of 2011 when, despite a last-minute agreement, the US debt rating was downgraded. The government will no longer have the necessary funds at the beginning of June, warned the Minister of the Economy. On this date, if Congress has not voted for an increase in the ceiling, the United States risks defaulting on payment, which would have catastrophic repercussions on the world economy. A few years ago Janet Yellen joked that she might be the first minister to face a default And to die of a heart attack, because of the stress.
A dash of humor proving that, despite her CV, “the little lady with the big IQ”, as it has been described, remains surprisingly simple and warm. After brilliant studies, she taught at Harvard and then became an economist at the Federal Reserve. It was there, in the canteen, that she met her future husband, George Akerlof, winner of the Nobel Prize in economics. She follows him to California where she teaches at Berkeley and collaborates in his work. When they go on vacation to the sea, she says, they carry a suitcase full of economics books and read without ever setting foot in the water. She presents herself as a “non-ideological pragmatist”, convinced that the economy can “make the world a better place”. Its priority is to reduce unemployment. The unemployed “are not just statistics for me”, she said in 2013.
Janet Yellen’s fate is tied to the last three Democratic presidents. Bill Clinton placed her in 1994 as head of economic advisers. Then she returned to the Fed before being appointed in 2014 by Barack Obama as President. As number 2, then number 1 of this institution, this lady with the helmet of white hair who always wears raised collars accompanies the longest period of American economic growth in History. Yet President Trump refuses to reappoint her. He judges her… too small (she measures 1.60 m) for such an important job!
Here she is ready to retire. But she is back at the request of Joe Biden. It tackles the revitalization of growth undermined by the pandemic and manages the major recovery plan. It is working to restore, after the Trump years, America’s credibility with its foreign counterparts. She also pushed for an agreement with 136 countries on the taxation of multinationals, orchestrated a series of sanctions against Russia and avoided for the moment a banking crisis in the United States, after the collapse of small establishments.
An influential minister?
Her critics criticize her for keeping a low profile and being less influential than her predecessors. A matter of style. Janet Yellen is neither loudmouth nor political. “It’s not entirely his fault. Joe Biden is more interested in political considerations than in economic arguments,” said David Wessel. She did not manage to convince him, for example, to lower the taxes on Chinese imports.
His biggest mistake was not anticipating the sharp rise in inflation, which would become a major issue in the midterm elections last year. In 2021, she says, like many others, that she will be “weak” and “ephemeral”. Janet Yellen will publicly admit on CNN to have been wrong. An extremely rare admission for a minister, who, contrary to his small size under Trump, did not cost him his place.