Tags: yellen | treasury | federal feserve | democracy | biden | 2024 | trump

Yellen: Threats to Democracy Risk US Economic Growth

Yellen: Threats to Democracy Risk US Economic Growth
Britain's Prime Minister Rishi Sunak, left, U.S. Treasury Secretary Janet Yellen, lower right, U.S. President Joe Biden, second left, at the G20 Leaders' Summit in New Delhi, India. (Ludovic Marin/Getty Images/2023 file photo)

Friday, 03 May 2024 07:48 AM EDT

Treasury Secretary Janet Yellen is arguing that a fractured democracy can have destructive effects on the economy — an indirect jab at Donald Trump.

Yellen, in an address prepared for delivery Friday in Arizona, uses economic data to paint a picture of how disregard for America's democratic processes and institutions can cause economic stagnation for decades.

Yellen, taking a rare step toward the political arena, never mentions Trump, the presumptive Republican presidential nominee, by name in her speech for the McCain Institute's Sedona Forum, but she hints at the former president's potential impact if he regains the White House.

Her remarks serve as a sort of warning for business leaders who prefer the former president's vision of achieving growth by slashing taxes and stripping away regulations.

Yellen acknowledges that democracy “doesn’t seem like typical terrain for a Treasury secretary,” but she adds that “democracy is critical to building and sustaining a strong economy.” A copy of her speech was released in advance by her office.

“The argument made by authoritarians and their defenders that chipping away at democracy is a fair or even necessary trade for economic gains is deeply flawed," she says. “Undercutting democracy undercuts a foundation of sustainable and inclusive growth.” She points to a study suggesting that democratization increases gross domestic product per capita by around 20% in the long run.

Yellen cites Jan. 6, 2021, as a day when democracy came under threat as "rioters, spurred on by a lie, stormed the Capitol." Trump, who asked that the 2020 election results be investigated, has been charged with conspiring to overturn the election, among four criminal cases he is facing. He denies any wrongdoing.

Farther from home, Yellen cited other global threats to democracy such as Russia's invasion of Ukraine.

In her speech, Yellen points to China as a cautionary example and warns that its future growth is “far from certain.” She says that the absence of some democratic pillars will "continue to pose challenges as China navigates the transition to an advanced economy.”

Yellen's speech comes when there is speculation — though no direct comments by the former president himself — that if he regains the White House he may put political pressure on the Federal Reserve to lower its benchmark interest rate, which stands at a two-decade high of roughly 5.3%. Fed Chair Jerome Powell this week said gaining confidence to lower rates “will take longer than previously expected.”

“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,” Yellen says in her speech. “Recent research has been consistent with my belief: It has shown that greater central bank independence is associated with greater price stability, which contributes significantly to long-term growth.”

A representative from the Trump campaign did not respond to an Associated Press request for comment.

Other leading economists and academics are challenging the right’s claims to the mantles of economic growth and liberty.

In a paper released this week, Vanessa Williamson, a senior fellow at the Urban-Brookings Tax Policy Center, said that businesses should be more concerned about the rule of law and democratic values.

She argues that there need to be stronger nonpartisan business associations and that CEOs and executives need to be fully aware of how a move away from democracy could hurt their bottom lines.

There is “indisputable evidence of the economic costs of democratic decline," she said. “These costs include stagnation, policy instability, cronyism, brain drain, and violence.”

Copyright 2024 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

Treasury Secretary Janet Yellen is arguing that a fractured democracy can have destructive effects on the economy - an indirect jab at Donald Trump.
yellen, treasury, federal feserve, democracy, biden, 2024, trump
Friday, 03 May 2024 07:48 AM
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