With the announcement that current Federal Reserve Chairman Ben Bernanke will not stay in his post after his term finishes up, a heated debate has bubbled up over whether President Obama should pick Janet Yellen or Larry Summers to replace him. One attribute Yellen brings that Summers doesn’t, of course, is diversity, as she would be the first woman to head the agency. Yet this discussion of gender has led some to indicate that she would be picked solely for diversity. Richard W. Fisher, president of the Federal Reserve Bank of Dallas, called her “extremely capable” yet said “we’ll see if [the pick] is driven by gender or other considerations and so on.” Many see sexism or at least bias in the conversation over whether Yellen is the best pick for the job
There are many people qualified for the post, but the debate about Yellen’s gender misses the things that make her a strong candidate:
1. She has the experience. While she has spent time in academia as a professor at the University of California, Berkley, she has a lot of real world experience when it comes to policies that impact the country’s financial performance. For the last three years she’s been the Vice Chairman of the Federal Reserve, Ben Bernanke’s second-in-command, and before that she served as CEO of the Federal Reserve Bank of San Francisco for six years. Before that she served on President Clinton’s Council of Economic Advisers, and before even that she was an economist with the Fed.
2. She has a solid track record of predictions. While predicting the future course of the U.S. economy is a tough job, one that was made even more difficult in the aftermath of the financial crisis, the Federal Reserve is tasked with doing just that. In an analysis of the predictions made by Fed policymakers, the Wall Street Journal finds that Yellen’s were the most accurate of the whole bunch. This is important, as predictions about the future strongly impact Fed policies. Getting it wrong could mean picking the wrong course of action and failing to support the struggling recovery.
3. She’s not overly focused on inflation at the expense of unemployment. The Fed has a “dual mandate”: it is responsible for keeping inflation low and employment high. But the fear of inflation often pushes policymakers to focus on that side of the ledger, which can hamper its ability to respond to high unemployment. Back in 1996, she convinced then-Fed Chairman Alan Greenspan that targeting zero percent inflation was a bad idea. A focus on getting inflation to zero would have superseded any efforts to respond to unemployment when the crisis hit.
4. She’s likely to continue the Fed’s current stimulus program. There’s been much arguing over whether the Federal Reserve should continue its quantitative easing program, which is one of its tools for trying to goose the economy into recovery. Yellen is likely to continue the program if she takes over for Bernanke. While the data on the program’s effectiveness is mixed, it seems to at least be propping up the slow recovery. And in a time of such high unemployment and slow growth, deploying any and all government tools is often thought to be wise.