White House mulling potential Janet Yellen departure after midterms

White House officials are quietly preparing for the potential departure of Treasury Secretary Janet Yellen after the midterms, the first and most consequential exit in what could be a broad reorganization of President Biden's economic team, according to people familiar with the matter.

Why it matters: While her potential departure would give Biden an opportunity to respond to public concern over his handling of the economy, it would also create an immediate political headache: finding a successor who can be confirmed by the Senate.

• The process is in the early stages and a decision on Yellen, or any Cabinet replacement, has not been made. Multiple sources stressed the outcome of November's election, including who controls the Senate, will factor into whether she stays.
• Yellen will also have some say in her fate, and with the world's economy teetering, there could be a convincing case for her to stay.

The intrigue: In addition to Yellen, officials are also considering the possibility that Brian Deese, the director of the National Economic Council, will leave early next year.

• Deese’s departure would present an opportunity for Gene Sperling, who is currently coordinating the implementation of the $1.9 trillion American Rescue Plan, to serve an unprecedented third term as NEC director after holding that post in the Clinton and Obama administrations.
• Cecilia Rouse, the chair of the Council of Economic Advisers, is also expected to return to her academic post in the spring of 2023, opening up another Cabinet-level economic position.

Between the lines: Yellen, an economist by trade and at heart, has been reluctant to make overly political arguments when they violate her core academic beliefs.

• The former Fed and CEA chair has disagreed with the White House on several high-profile issues, including the White House faulting corporations for increasing inflation and — most recently — Biden’s decision to forgive some student debt.
• She has also made several statements that White House officials have privately viewed as blunders. Yellen publicly admitted this summer she was wrong on inflation, and last year said it would be a "plus" if the Fed raised interest rates.

What they're saying: "While we are prudently planning for potential transitions post-midterm, neither Secretary Yellen or Brian Deese are part of those plans," White House senior adviser Anita Dunn said in a statement.

• Yellen has no plans to leave, said Lily Adams, a Treasury spokesperson.
• "Chair Rouse will return to Princeton University at the end of her two-year public service leave, likely early spring 2023," according to a White House official.

Driving the news: White House officials are prepping for post-midterm turnover and are conducting a talent search for both senior staff and Cabinet positions, Axios has reported.

• Republicans have placed high inflation and sluggish economic growth at the center of their midterm message. Biden's approval rating on the economy currently sits at 36%, with 57% of voters disapproving, according to a recent ABC News/Washington Post poll.

• Republicans will seize on any expected departure from the economic team as a tacit admission that Biden has mishandled the economy.

The big picture: The world's presidents, central bankers and finance ministers are deeply concerned about the state of the global economy, giving it an ominous feeling with parallels to 2007, Axios' Neil Irwin has written.

The other side: White House officials are convinced they have a compelling economic story to tell and are eager to define — and debate — Bidenomics.

• They have dispatched Yellen to hit the road this month to make the case for Biden's handling of a post-pandemic economy — a vote of confidence in Yellen's improved political skills.
• The president highlights the 3.7% unemployment rate and a resurgence in manufacturing as evidence that his approach has worked.
• Officials are deeply frustrated by the media's focus on the 8.3% headline inflation rate. And they are stung by charges from fellow Democrats like former Treasury Secretary Larry Summers that their policies have stoked inflation.

What we're watching: At a perilous moment for the global economy, some officials will argue for keeping the battle-tested Yellen in place in part because of the respect she commands from the world's finance ministers and central bankers.

Go deeper: Among possible successors are Commerce Secretary Gina Raimondo, who has told colleagues she finds chatter about a potential move distracting, and Fed Vice Chair Lael Brainard.