- Keynesian economist
- Appointed by President Bill Clinton to the Federal Reserve Board and the Council of Economic Advisers
- Appointed by President Barack Obama to chair the Federal Reserve Board
- Professor emeritus of economics at the Haas School of Business
Janet Yellen was born on August 13, 1946 in Brooklyn, New York. After earning a bachelor’s degree in economics from Brown University in 1967 and a Ph.D. (also in economics) from Yale in 1971, Yellen taught economics at Harvard from 1971-76. She then spent two years counseling the Federal Reserve System’s Board of Governors on issues such as international trade and finance, and from 1980-94 she held a faculty position at UC Berkeley’s Haas School of Business.
According to Business Insider, one of Yellen’s old high-school classmates describes her as “a classic ’60s liberal.” Throughout her career as an economist, Yellen, a Democrat, has been an adherent of Keynesian economic theory. As developed by the late British economist John Maynard Keynes, Keynesianism postulates that: (a) the federal government is best equipped to reverse or minimize economic downturns, either by increasing the overall money supply or bankrolling public-sector programs in order to stimulate money exchange; and (b) the Federal Reserve should keep interest rates as low as possible in order to provide low-cost funding for the government, even as the latter engages in deficit-spending and accumulates debt.
During her 14-year tenure at UC Berkeley, Yellen published numerous articles that openly endorsed Keynesian principles. In 1999 she said: “Will capitalist economies operate at full employment in the absence of routine intervention? Certainly not. Do policy makers have the knowledge and ability to improve macroeconomic outcomes rather than make matters worse? Yes.” In a similar vein, Yellen told Berkeley’s business-school magazine in 2012: “While admirers of capitalism, we also to a certain extent believe it has limitations that require government intervention in markets to make them work.” According to Allen Sinai, a longtime Keynesian and currently the president of Decision Economics, Inc., “The philosophy of Janet Yellen is activism of government policy to achieve [Federal] objectives.”
In February 1994 President Bill Clinton appointed Yellen to sit on the Federal Reserve Board. Three years later, Clinton made Yellen the chair of his Council of Economic Advisers, a post she held until 1999. Yellen also served on the Congressional Budget Office’s Panel of Economic Advisers, and was a senior adviser to an economic-activity panel at the Brookings Institution.
From 1999-2006 Yellen was the Eugene E. and Catherine M. Trefethen Professor of Business and Professor of Economics at UC Berkeley. In 2004-05 she was a vice president of the American Economic Association, where she would later serve as a distinguished fellow (2012) and as president-elect (2019).
From 2004-10, Yellen served as president and CEO of the Federal Reserve Bank of San Francisco, where (in 2005) she was the first official to describe the rise in housing prices as a “bubble” that might ultimately harm the U.S. economy. Her warnings about a possible housing crisis, however, were “tentative and inconsistent,” according to The New York Times.
During her years in San Francisco, Yellen did not advocate for any change in the policies of the Federal Reserve, which, under her watch, did little to rein in the excesses and abuses of the banks under its supervision. Among those questionable practices was the widespread issuance of subprime loans. Yellen did eventually try to warn lawmakers in Washington of the dangers that were brewing in the housing market, but never attempted to constrain lenders unilaterally. “I honestly don’t know if we could have done that,” she later told the Financial Crisis Inquiry Commission in 2010. “I don’t think we felt empowered to do it.”
From 2010-14 Yellen was vice chair of the U.S. Federal Reserve, where she helped chairman Ben Bernanke implement the policy of quantitative easing, whereby the Fed sought to promote increased lending and liquidity by flooding financial institutions with capital—a practice that historically has tended to result in steep inflation. According to The Economist magazine, not only was Yellen “a strong backer of Mr. Bernanke’s expansionary policies” (i.e., quantitative easing), but she also “made the case for a more sustained attack on unemployment with prolonged zero interest rates, even at the cost of temporarily higher inflation.” The New York Times confirmed in October 2013 that Yellen and Bernanke had “forged a consensus in the fall of 2012 for the Fed to expand both of its principal campaigns to spur job creation: more asset purchases, and an extended commitment to low interest rates.”
On October 9, 2013, President Barack Obama nominated Yellen to replace Bernanke as Federal Reserve Board chair beginning in February 2014, when the incumbent’s term was slated to expire. Said Forbes magazine: “Yellen, like Bernanke before her, believes that the creation of money for the sake of doing so is the path to growth.”
At a Capitol Hill hearing on May 6, 2014, Yellen told Democratic U.S. Senator Bernie Sanders of Vermont—a self-identified socialist—that recently published statistics on income inequality “greatly concern me … [because] they can … determine the ability of different groups to participate equally in the democracy and have grave effects on social stability over time.” “There’s no question that we’ve had a trend toward growing inequality,” added Yellen, “and I personally find it [a] very worrisome trend that deserves the attention of policy-makers.”
Yellen revisited this theme in October 2014, when she told a conference on economic opportunity and inequality sponsored by the Federal Reserve Bank of Boston: “The extent and continuing increase in inequality in the United States greatly concern me. I think it is appropriate to ask whether this trend is compatible with values rooted in our nation’s history, among them the high value Americans have traditionally placed on equality of opportunity…. The past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority.”
Yellen stepped down from her post as chair of the Federal Reserve Board when her term expired on February 3, 2018. The previous day, the Brookings Institution had announced that Yellen would soon be joining the think tank as a distinguished fellow in residence.
In 2018 as well, Yellen was a signatory to an amici curiae brief that expressed support for Harvard University in the Students for Fair Admissions v. Harvard lawsuit, where the plaintiffs alleged that Harvard’s affirmative-action admissions policies discriminated against Asian-American applicants whose grades and standardized-test scores were significantly better than those of their non-Asian counterparts.
In addition to her other activities, Yellen today is also a professor emeritus of economics at UC Berkeley’s Haas School of Business.
Further Reading: “Janet Yellen: What You Should Know about the Next Fed Head” (The Objective Standard, 10-10-2013); “Janet Yellen” (Brookings.edu); “What They’re Saying About Janet Yellen” (Forbes, 10-9-2013); “Yellen’s Path From Liberal Theorist to Fed Voice for Jobs” (NY Times, 10-9-2013); “Yellen’s Focus on Unemployment Adopted by Fed After Crisis” (Bloomberg.com, 4-25-2013); “Obama’s Nomination Of Janet Yellen Is A Blow To Recovery-Starved Americans” (Forbes, 10-8-2013); “Fed Chair Unsure If Capitalism or Oligarchy Describes the U.S.” (CNS News, 5-8-2014); “Janet Yellen Decries Widening Income Inequality” (Wall Street Journal, 10-17-2014); “Welcome to Brookings, Chair Yellen” (Brookings.edu, 2-2-2018).
- “I never said for sure there was a bubble, but that it was a possibility,” Yellen said in September 2006. “I guess I was inclined to think maybe there was. But I have seen what has happened in the last year or so, and now I’m more dubious.”
- On October 20, 2014, journalist Bruce Thornton addressed and demolished Yellen’s claims. Thornton wrote:
The “income inequality” claim depends on ignoring numerous data that contradict it. For one thing, it glosses over the mobility among the 5 income cohorts over time … A few years ago the Department of Treasury … [found] that between 1996 and 2005 over half of taxpayers moved to a different income quintile. Half of taxpayers in the bottom quintile in 1996 moved to a higher income group in 2005. Meanwhile, only 25% of the richest 1/100 of 1% in 1996 were still that rich in 2005. This mobility has indeed stalled, but not for “several decades,” as Yellen claimed, and not because of the sinister machinations of the wealthy. Its cause rather is the sluggish economic growth after the recession ended 5 years ago, and the blame for that in large part falls on Obama and the Democrats’ regulatory overreach, trillion-dollar deficits, … anti-business rhetoric, and redistributionist economic policies….
The “income inequality” meme ignores other facts as well. It focuses only on “money income,” neglecting the value of government transfers like Medicaid, Electronic Benefit Transfer cards (formerly known as food stamps and welfare checks), emergency-room health care, Section 8 housing subsidies, and the Earned Income Tax Credit, all of which boost the buying power of the statistical poor and lower middle class. For the middle class, “money income” ignores the value of employer-provided fringe benefits such as health care. As for the rich, “money income” ignores the highly progressive taxes they pay to fund those government programs. As Gary Burtless of the Brookings Institution writes, “To disregard the impact of transfers and progressive taxation on the distribution of income and family well-being is to ignore America’s most expensive efforts to lessen the gap between the nation’s rich, middle class, and poor.”
Finally, consumption—how much people spend—is more revealing than “money income” as a measurement of economic well-being. In fact, consumption rates of the lowest income quintile have increased over the years, reaching nearly twice of income in 2005. As a result, Kip Hagopian and Lee Ohanian write, “A family claiming $22,300 in income in 2005 would have reported about $44,000 in expenditures in that year…. [T]he gap between reported income and consumption is filled by various categories of government transfer payments (including Medicaid, food stamps, subsidized housing, the Earned Income Tax Credit, Temporary Assistance for Needy Families, etc.), family savings, imputed income from owner-occupied housing, barter, support from family and friends, and income from the underground economy.” Indeed, if one takes into account consumption, the statistical poor enjoy living standards higher than the average European. The obsession on “money income” ignores how well all Americans live.
A Return to Keynes?
By Thomas Sowell
October 15, 2013