In 2014, three months into her four-year tenure as chair of the Federal Reserve Board, Janet Yellen was attempting to chart an important bond for investors, policymakers, and community development leaders.
“Although we operate through the financial markets, our goal is to help Main Street, not Wall Street. By keeping interest rates low, we try to make homes affordable and revive the housing market. We try to make business creation, expansion and employment cheaper for companies.” ” Yellin said In remarks at a conference in Chicago.
Six years later, Yellen, 74, was reportedly the choice of President-elect Joe Biden as Treasury secretary, the Wall Street Journal reported Monday.
If chosen and confirmed – to become the first woman to hold the job – many families will rely on Yellen to remain focused on the relationship between decisions on Capitol Hill and their finances.
Coronavirus causes millions of people to stop working. The unemployment rate fell to 6.9% in October, down from double digits in the spring, but some economists are concerned that an escalating coronavirus infection and more government lockdown orders will shake the recovery. Various deadlines for financial relief, such as delaying evictions and paying off student debts, will expire on December 3, while negotiations on another relief package in Congress have stalled.
Desmond Lachman, a resident fellow at the American Enterprise Institute, a right-leaning think tank, said Yellen, the business economist who has spoken out about income inequality problems, would remember Main Street. “She’s going to be very responsible, but at the same time, she’s going out there to hit for the people at the lower end of the spectrum,” Lachman said. “She will be very sensitive to their problems.”
Here’s a look at what experts say the Treasury led by Yellen will mean another round of government stimulus and taxation in the Biden administration and canceling student debt.
Another round of government stimulus
Markets closed higher on Monday, and the uptrend continued on Tuesday with the Dow Jones Industrial Average.
On the way to close above the 30,000 mark for the first time, buoyed in part by news about vaccines, some analysts said, Lillin’s expected appointment. They added that Yellen’s possible choice is a good sign that the Biden administration is serious about getting another stimulus bill through Congress, after the money from the $ 2.2 trillion CARES Act has dried up.
Yellen was speaking out loud about needing more financial assistance. “There is a dire need for spending in order not to extend more pain throughout the economy and for unemployment to continue to decline,” Yellen, currently at the Brookings Institution, He said at a congressional hearing in July.
Ernie Tedeschi, managing director and policy expert at Evercore ISI, an investment banking advisory firm, wrote in a memo Monday that Yellen “believes it is necessary to continue financial and monetary support to the economy, and is likely to seek to bolster its credibility” with Congress over time to bolster more. Of financial support, including for the unemployed and for state and local governments. “
Passing the stimulus bill is a consensus political process, but Josh Bevens, director of research at the Economic Policy Institute, a left-wing think tank, said Yellen had the charisma and understanding of issues to convince potential Republicans. Bevins said more stimulus is inevitable, as we are “going through very difficult economic times.”
If Yellen is selected and confirmed, she will have a former colleague, Jerome Powell, to collaborate with at the Federal Reserve. Powell, who succeeded Yellen as chair of the Federal Reserve, supports the planting of the economy with more stimulus money.
Review tax law regulations
Biden campaigned for positions including higher taxes for the wealthiest individuals and companies. With ample opportunity for Congress to split, some observers say these tax increases proposals have gone out of the window. But they add that there are still ways in which the Biden administration could bring in more tax revenue from the wealthiest Americans and corporations while modifying the code for low-income earners without congressional approval.
With the Internal Revenue Service within the Treasury Department, Lillian could be central to this endeavor.
For example, the Treasury Department led by Yellen and the IRS could review some tax law regulations regarding foreign assets of US multinational corporations. Bevins said it was an “open question” if Yellen and the Treasury were willing to make unilateral regulatory changes.
Bevins pointed to another place the IRS could bring in more money: A larger staff could conduct more audits of wealthy taxpayers.
The unimportant caveat, experts added, is that increasing the number of tax authority employees requires a larger budget – and allocating budget funds, like the stimulus talks, is a political process.
Writing off student loan debts
Advocates of student loan borrowers say Biden has the power to cancel student debt, which has grown to $ 1.6 trillion.
Yellen is well aware of the debt burden and its implications for home buying and the economy in general. For example, in 2016, then-Federal Reserve Chair Yellen Congress saidWe have been very attentive to trends in student debt, [and] It really has escalated to an extraordinary degree. “
It is difficult to determine how these views can translate into an influence on policy. The Department of Education is the agency primarily responsible for the student loan program, but there are opportunities for the treasury to play a role.
For example, the Treasury Department usually collects debt owed to the government, however Due to the exemption provided From the Treasury to the Department of Education, the DOE generally manages the collection of bad student loan debt. (The agency hires contractors to do the work.)
In theory, the Treasury Strings can be attached To this exemption to push the Education Department to change its practices.
Additionally, the Treasury Secretary technically appoints the Student Loan Ombudsman of the Consumer Finance Protection Board, who is one of the nation’s top student loan officers.
do not miss: Under Biden, the CFPB would play a role in any student debt cancellation – and help deal with student loan services.
The tax treatment for a student loan waiver is an area that provides Yellen with an opportunity to play a transformative role. If Congress absolves some or all of students’ debts to borrowers, lawmakers can specify the tax treatment for that exemption. But if the administration goes ahead with canceling student debt on its own, the tax implications will become more blurred.
The Treasury and the IRS have the authority to exclude student debt cancellation from borrower income for tax purposes, John Brooks, professor of Georgetown University Law Center, Books in a paper It is published by the Student Borrowers Protection Center, which is an advocacy group for borrowers.
“The Treasury, through the IRS, has a lot of power to interpret tax law in a certain way,” Brooks said. “It may need to reflect the administration’s policy agenda,” he added. This means that guidance on this issue will flow from the Treasury Department to the Treasury Secretary, he added.