Janet Yellen ‘all in’ to ensure climate spending

US treasury secretary Janet Yellen is, according to close associates, digging in to oversee billions of dollars in federal climate and infrastructure spending that she believes will transform the economy, defying demands from Republicans to step down. 

Yellen’s oversight of about $270bn in tax credits for electric vehicles, home solar panels and other climate purchases contained in the Inflation Reduction Act have made her a pivotal climate figure in President Joe Biden’s administration.

But the high profile, as well as signals from markets and some economists of coming recession, are expected to intensify demands from Republicans for Yellen, 76, to step down, citing her too-rosy inflation forecasts and failure to rein in federal spending that they say is to blame.

Yellen has also clashed with Republican legislators about the statutory limit on US debt, warning that failure to raise the debt ceiling threatened the  credit rating of the US and could disrupt financial markets.

Yellen told CNBC late in 2022 that she was “in good company” in misjudging inflation, and Biden’s Covid spending plans were needed to boost recovery.

She has publicly and repeatedly shrugged off talk of her stepping aside midway through Biden’s four-year term, steeled by what close associates say is her confidence in Biden’s continuing support.

The White House and Treasury had no immediate comment on a Bloomberg report saying that Biden asked her to stay on.

White House and Treasury officials say inflation was spurred by supply chain problems and worsened by Russia’s invasion of Ukraine. But they say that inflation is now easing and investments in manufacturing will reduce future supply chain logjams.

“Secretary Yellen is all in on making sure we achieve the dual goals of reducing emissions and rebuilding American industry,” senator Ron Wyden, who chairs the Senate finance committee, told Reuters.

The first woman to serve as Fed chair and treasury secretary, Yellen presided over another milestone in December: the launch of the first US banknotes signed by two women.

While Republicans broadly supported Yellen’s confirmation as treasury secretary, some say they are disappointed by what they see as her too-progressive agenda, including a drive to forgive student debt, which economists say could add $300bn to $600bn to the federal debt.

“Sadly, she is living proof that when financial aptitude is made subservient to ideology, even the talented fall from grace,” EJ Antoni, a research fellow at the conservative Heritage Foundation, wrote in a recent blog post.

Republicans, who now control the House of Representatives, have launched a probe of Yellen’s advisory committee on racial equity, saying it will further politicise the department, and are considering an investigation into her proposal for a 15% minimum global corporate tax.

In a letter to Yellen in December, senior Republicans including senator Jim Risch and representative Kevin Brady said the tax would have a negative effect on US businesses, and criticised Yellen for not responding to their concern.

The treasury had no comment on the Republican worries, but officials said previously the department’s policies are overdue and urgently needed.

In addition to advancing Biden’s domestic climate agenda, Treasury officials say another key priority for Yellen in 2023 will be advancing reform of the World Bank and other multilateral lenders to free up more resources for countries to address climate change and other priorities.

Yellen, who has logged about 100,000 miles of air travel in the job, leaves next week for Africa, with stops in Senegal, Zambia and SA, as part of a broader US push to counter China’s influence on the continent.

Treasury officials say that the secretary’s mounting frustration with Beijing, now the world’s biggest creditor, for not moving forward faster to restructure the debt of low-income African countries will be a key issue, especially in Zambia.

“Janet Yellen has restored the US to the centre of the multilateral system in terms of global economics,” said Kevin Gallagher, who heads the Global Development Center. “Will it be perfect? No, but at least the US isn’t facing 100% inward, which is the way it was a couple of years ago.”

Reuters