May 1, 2024 - Politics & Policy

Scoop: Yellen's urgent warning on threats to U.S. democracy

Yellen sits before a U.S. flag

WASHINGTON, DC - APRIL 17: U. S. Treasury Secretary Janet Yellen. (Photo by Michael A. McCoy/Getty Images)

Treasury Secretary Janet Yellen will use a speech to the McCain Institute in Arizona on Friday to deliver a clear warning about the economic dangers presented by Jan. 6-style attacks on American institutions.

Why it matters: It's an unusual topic for a treasury secretary. But the Biden administration wants to tell voters — and Wall Street — that a second Trump administration would have economic risks.

  • So the president is dispatching Yellen to a swing state — and a forum named after a famous Republican, the late Sen. John McCain — to draw a link between a healthy democracy and a strong economy.
  • The business community has been getting comfortable with the idea of a Trump win in November. Jamie Dimon, the chair and CEO of JP Morgan Chase told a Davos audience this winter that Trump "grew the economy quite well."

What they're saying: "I admit that this doesn't seem like typical terrain for a treasury secretary," Yellen plans to say at her speech in Sedona, according to excerpts obtained by Axios.

  • "Recently, democracy has come under threat. That challenge was especially terrifying on the notorious day of January 6th, when rioters, spurred on by a lie, stormed the Capitol," Yellen plans to say.
  • "Undercutting democracy undercuts a foundation of sustainable and inclusive growth."

Zoom out: Voters have told pollsters that they trust Trump more on the economy than Biden, even as economic fundamentals indicate that the economy is better than than they acknowledge.

  • Biden used his State of the Union Address to try to convince voters of that, but inflation remains a problem.
  • Biden advisers are frustrated by a phenomenon they call "Trump amnesia" — in which many voters seem to forget the last year of Trump's presidency and his response to COVID-19.
  • As the 2024 campaign picks up, they have tried to remind Americans what the economy — and unemployment — looked like at the height of the pandemic under Trump.

Zoom in: Arizona, with its marque Senate race and passionate debate about over its 1860s law banning abortion (which the state House has voted to repeal), is a crucial battleground in the 2024 campaign.

  • In a reference to Trump's plans to dramatically increase presidential powers, Yellen will make a broad historical argument — with references to East Germany — on how autocratic regimes stifle economic growth.
  • She'll also make a plea for the Federal Reserve's independence, an issue that's important to traders on Wall Street, who expect the Fed to make decisions based on economic data and not political pressure.
  • "As chair of the Federal Reserve, I insisted on the Fed's independence and transparency because I believe it matters for financial stability and economic growth," she will say.

Between the lines: Early in his presidency, Trump passed over Yellen for Fed chair and picked the current chair, Jerome Powell.

  • But later Trump was harshly critical of Powell for not cutting interest rates more aggressively — and threatened to fire him.
  • A recent Wall Street Journal article detailed plans by Trump advisers to radically reduce the Fed's independence.
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