Janet Yellen, at long last President Barack Obama's nominee for the next chairman of the Federal Reserve, is also something else: His first appointment focused on jobs and economic growth.
It's a sad fact that, five years into his presidency, Obama has shown little interest in nudging monetary policy toward growth -- or even just appointing growth-minded policy makers. Yellen changes that. She has been outspoken about the need for the central bank to support a U.S. economic recovery with accommodative monetary policy -- and, in particular, to reduce unemployment. Meanwhile, Obama has been an outspoken, if not well-argued, advocate for the hawkish view that continued easing creates risks of financial bubbles and instability.
"What I'm looking for" in a Fed chief, he told the New York Times back in July, is somebody "to keep inflation in check, to keep our dollar sound, and to ensure stability in the markets." Amid high unemployment, Obama wanted someone who'd still "keep an eye on inflation, and if it starts heating up, if the markets start frothing up, let’s make sure that we’re not creating new bubbles."
Those comments aren’t at all out of place in the Obama administration’s view of monetary policy. You can hear his emphasis on risks that would cause the Fed to tighten. It's strange to see the president, who you would think wants the economy to grow, so ready to throw away his best option to realize that outcome. And it is a particularly egregious error when, as Obama knows, Republican opposition means fiscal policy cannot ride to the rescue. With Yellen, though, Obama has been forced by members of his own party to hand over the top job in monetary policy to someone decidedly not of his persuasion.
That is a change from his other appointees to the Fed's Board of Governors, where Obama has largely gotten his way. Consider the debate over how to end its $85 billion monthly purchases of Treasury and mortgage debt. Who was pushing the Fed to the exits? Well, that would be Fed governors Jeremy Stein, Jerome Powell and Elizabeth Duke. Obama appointed two of them: Look no further than the White House to answer who let the hawks out.
Compare that to Yellen: "My colleagues and I are acutely aware of how much workers have lost in the past five years," she told the AFL-CIO in February. "These are not just statistics to me. We know that long-term unemployment is devastating to workers and their families."
One possibility for why the White House has done little on monetary policy is that Republicans blocked the appointment of Peter Diamond, the only Fed nominee who sounded audible dovish notes. Another is that the Obama administration just doesn’t think much about monetary policy -- and so hawkishness isn’t a policy position so much as a demonstration of ignorance.
It's never been clear why Obama has talked like a hawk -- or why, as Matthew Yglesias pointed out in a 2011 piece in the journal Democracy, why the left hasn't fought more aggressively for more growth-oriented monetary policy. But maybe Yellen will help him change his tune.
Obama will soon have an opportunity to do just that. The Fed's Board of Governors, which he stacked with hawks in his first term, will have four openings by 2014. Ben Bernanke is on his way out, Sarah Bloom Raskin is headed to the Treasury Department, and the terms of Duke and Powell are ending. It would be nice if Obama's first dove isn't his last.
(Evan Soltas is a contributor to the Ticker. Follow him on Twitter.)