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What possible changes to Joe Biden’s team could mean for the economy

Biden’s economic team is going to look different in 2023. But how much different is the question.

On Tuesday night, Axios reported that White House officials are considering the possible departures of three top economic officials after November’s elections — Janet Yellen, Secretary of the Treasury; Brian Deese, director of the National Economic Council; and Cecilia Rouse, chair of the Council of Economic Advisers (CEA).

In a statement to Yahoo Finance, a White House official denied the report, saying, “While we are prudently planning for potential transitions post midterm elections, neither Secretary Yellen nor Brian Deese are part of those plans.” The official also noted that Rouse will end her time in the White House “likely early spring 2023” to return to Princeton, from which she is currently on leave.

Either way, the report left economic observers wondering about the impact departures could have on the White House’s ongoing response to the turbulent economy, stubborn inflation, and a possible recession — all of which are likely to still be front and center for Biden’s team in 2023.

U.S. Treasury Secretary Janet Yellen speaks as U.S. President Joe Biden holds a meeting with business leaders and CEOs about the debt limit at the White House in Washington, U.S., October 6, 2021. REUTERS/Kevin Lamarque     

Treasury Secretary Janet Yellen speaks during a meeting with President Joe Biden and business leaders in October 2021. (REUTERS/Kevin Lamarque)

“It wouldn’t be a surprise if after two years you start to see some turnover in the Cabinet,” economist Austan Goolsbee, a former holder of one of those top seats himself, on an appearance Wednesday with Yahoo Finance Live, noting that such changes are in line with historical trends.

The former CEA chair also downplayed implications of the possible departures. “If you look at the historic pattern of legislative activity, the president does in about one year almost everything he is going to do legislatively on the fiscal side,” adding that later actions tend to be at a “much smaller scale than … in the first 100 days for the first year.”

On the agenda for 2023

Biden and his team have indeed been busy on the fiscal front during his first two years in office, signing bills such as the American Rescue Plan, the Bipartisan Infrastructure Law, the Chips for America Act, and the Inflation Reduction Act.

But looking forward, a Republican takeover of one or both chambers of Congress could mean that big follow-up bills may be harder to come by. For Biden and his aides, a top priority on the economic front may instead become the work of implementing the laws that were passed during his first two years. The Inflation Reduction Act, in particular, has some provisions that won’t kick in for years.

In a note following the Axios report, Cohen Washington Research group suggested that there would be minimal policy implications of potential turnover at Treasury, especially around cryptocurrencies and the push for stable coin oversight. The group noted that the two most likely successors would be Commerce Secretary Gina Raimondo or Federal Reserve Vice Chair Lael Brainard.

On the one hand, “Brainard would be closer to a continuation of the status quo,” especially on cryptocurrency, the group wrote. But for Secretary Raimondo, they stated, “It is hard for us to see her radically changing Yellen’s approach.”

Rep. Patrick McHenry (R-NC) and Rep. Maxine Waters (D-CA) listen to Federal Reserve Board Chair Jerome Powell (not pictured) as he testifies before a House Financial Services Committee hearing in Washington, U.S., June 23, 2022. REUTERS/Mary F. Calvert

Rep. Patrick McHenry (R-NC) – left – is aiming to take the gavel of the House Financial Services Committee from Rep. Maxine Waters (D-CA) if Republicans gain a majority in the fall. (REUTERS/Mary F. Calvert)

Republicans, meanwhile, are aiming to derail Biden’s economic agenda if they take power. They have largely spent 2022 campaigning that Biden’s policies, in particular the $1.9 trillion American Rescue Plan, have led to high inflation.

Rep. Patrick McHenry (R-NC 10th District) is set to lead the House Financial Services Committee in 2023 under possible GOP control and recently said, “The No. 1 thing is to stop digging the ditch” when it comes to fighting inflation, adding that stringent oversight of the Biden administration is a close-second priority.

‘For the advisers to the president, it’s a sprint’

In any case, turnover on the economic team is quite common two years into a new presidency. In fact, two years in, both Bill Clinton and George W. Bush faced the challenge of replacing all three top members of their economic teams.

But if Secretary Yellen were to depart, she would be leaving more quickly than two of her predecessors, who also served newly elected presidents. Both Timothy Geithner (Obama) and Steven Mnuchin (Trump) entered the Treasury Department and stayed for the entirety of their bosses’ terms.

In total, four out of the last six Treasury Secretaries who entered office with a new president stayed for the entire term. The two that left earlier, Lloyd Bentsen under Bill Clinton and Paul O’Neill under George W. Bush, left shortly after midterms.

U.S. National Economic Director Gary Cohn (L) and Treasury Secretary Steven Mnuchin unveil the Trump administration's tax reform proposal in the White House briefing room in Washington, U.S, April 26, 2017. REUTERS/Kevin Lamarque

Gary Cohn (left) and Steven Mnuchin – seen in 2017 were two of the top economic advisors early in the Trump administration. (REUTERS/Kevin Lamarque)

Others meanwhile have had even shorter runs. Yellen has already served longer than Larry Summers who took up residence at the Treasury Department in July 1999 and left with George W. Bush’s inauguration in 2021. Summers has stayed prominent as an economic commentator weighing in just this week on issues like tax cuts in the UK and the chances of a ‘hard landing’ for the economy.

Multiple sources in the Axios report also underlined that Yellen’s departure is far from set in stone and the outcome of November’s election will influence the decision. Lily Adams, a top aide to Secretary Yellen, told Yahoo Finance that “Secretary Yellen has no plans to leave.”

President-Elect Bill Clinton (Center) takes questions from the media after announcing the economic team for his administration, December 10, 1992 in Little Rock, Arkansas. The appointees are (L-R) Alice Riwlin, Deputy Director of the Office of Management and Budget, Robert Rubin, Chairman of National Economic Council, Vice President-Elect Al Gore, President-Elect Clinton, Leon Patta, Office of Management and Budget, Lloyd Bentsen, Secretary of the Treasury, and Roger Altman, Department of the Treasury.       REUTERS/Gary Hershorn (UNITED STATES POLITICS) BEST QUALITY AVAILABLE

President-elect Bill Clinton announces his economic team in 1992 in Little Rock, Arkansas. (REUTERS/Gary Hershorn)

Meanwhile, tenures for the other two top economic posts — the director of the National Economic Council Director and the chair for the Council of Economic Advisers — are often historically much shorter. There is only one example in the last 30 years — Gene Sperling’s first run at NEC director during Bill Clinton’s second term — of someone holding either of those posts for 4 years.

Sperling, who also held the title under Obama, could be in line for a third run atop the NEC if Deese leaves.

For his part, Goolsbee ran Barack Obama’s CEA for about a year and noted Wednesday, “For the advisers to the president, it’s a sprint, and for the president himself, it’s a marathon.”

Ben Werschkul is a Washington correspondent for Yahoo Finance. Jennifer Schonberger contributed reporting to this article.

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