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    Jobs slump and Covid lead litany of post-Trump crises facing Janet Yellen

    Of all the 78 US Treasury secretaries since Alexander Hamilton first took up the office in 1789, few have faced an in-tray piled quite so high as the one that will greet the first woman in the job: Janet Yellen.The choice of the Brooklyn-born doctor’s daughter to succeed Steve Mnuchin was a statement of intent by president-elect Joe Biden. Where many of her predecessors have been scions of Wall Street, Yellen’s background is in economics and public policy, and she has made it clear that her priorities are with Americans struggling to get by rather than with investment bankers. “There is a huge amount of suffering out there,” she said in September as she urged Congress to agree a new stimulus package.Yellen’s expressed desire for tighter financial regulation did not, however, stop Wall Street from joining the applause for her nomination. In part, that was due to the fact that, having been the first woman to be in charge of America’s central bank, she is seen as a seasoned pro. Donald Trump declined to give her a second term as chair of the Federal Reserve in 2018 not because she was doing a bad job, but because she was a Democrat appointed by Barack Obama.More importantly, though, Wall Street sees Yellen as a Treasury secretary who will push hard for expansionary policies aimed at boosting growth, profits and share prices. Nothing in her record suggests that the financiers are wrong.American economists are often divided into two camps: “freshwater” economists who believe in the primacy of market forces and whose spiritual home is the University of Chicago in landlocked Illinois; and “saltwater” economists, who emanate from the universities on the Atlantic and Pacific seaboards and admire the teachings of John Maynard Keynes.Yellen is a Keynesian to her fingertips: she warned against an over-hasty removal of stimulus during the financial crisis of a decade ago; she insisted that the Fed pay as much attention to unemployment as to inflation when she was its chair; and she believes the state has a duty to tackle poverty and inequality.Mohamed El-Erian, once chief executive of the investment management firm Pimco but now president of Queens’ College, Cambridge, said: “The appointment was probably one of the most well-received in the history of the US Treasury, and for good reason. Economists, lawmakers and market participants rightly see her as highly qualified, having lots of relevant experience and coming to the job with a deep understanding of both domestic and international issues. The policy portfolio she inherits will require an agile mix of traditional and out-of-the-box thinking.”Top of the to-do list will be a new package of support for a US economy struggling with three interlinked problems: a pandemic, high levels of unemployment, and the imminent expiry of financial support for laid-off workers.The jobless total has come down since surging to levels not seen since the Great Depression in the first wave of infections in the spring, but remains troublingly high for a country with, by western standards, a limited welfare safety net. What’s more, the latest data on Friday showed the rate of job creation slowing.Biden wants Congress to pass a “robust” stimulus package, and the chances of that happening will be greatly improved if the Democrats seize control of the Senate by winning the two vacant seats in Georgia next month. If not, as Mark Sobel of the Omfif thinktank says, Biden will be dealing with a “stingy” Republican Senate leader, Mitch McConnell.The appointment was probably one of the most well received in the history of the US Treasury“Yellen will help negotiate and provide intellectual backing, making the case that now is the time to spend and that with low debt service costs, America should not fret in the near-term about rising debt,” Sobel says.Getting an emergency package of stimulus through Congress will only be the start of the legislative battle, because Biden also wants to spend more on upgrading America’s crumbling infrastructure and on tackling global heating.Yellen’s scope for fiscal action (tax and spending measures) may be limited by gridlock in Congress, in which case the White House will require the Fed to provide more stimulus and a good working relationship between Yellen and the man who succeeded her as head of the central bank, Jerome Powell.While sorting out the labour market and boosting living standards will be the biggest challenge, Yellen will also devote time to other policy issues. She has the executive power to toughen up what she sees as too-weak financial regulation without Congress’s say so; she will adopt a less hostile – if still robust – approach towards China; and she will seek to reassert US leadership on the global stage, pursuing a multilateralist rather than a go-it-alone approach.In all, Yellen can be expected to act as if Trump’s four years in office never happened. The message will be that the grownups are back in charge.Six central bankers who shaped the future of their economiesBen Bernanke Chair of the US Federal Reserve between 2006 and 2014, Bernanke was credited with preventing a deep recession following the 2008 financial crisis. A student of the 1930s Great Depression, he vowed to rescue the banking system and maintain the flow of funds to prevent a wave of foreclosures and mass unemployment.His determination contrasted with the Bank of England, which hesitated before rescuing Northern Rock. However, Bernanke, a former Princeton professor, played down the threat from the US sub-prime mortgage scandal during the first two years of his tenure, which he has admitted made the crisis, when it came, much worse.Karl Otto Pöhl Often dubbed a father of the euro, Pöhl was appointed president of the German Bundesbank from 1980 to 1991 by his friend and mentor, chancellor Helmut Schmidt. A colourful, English-speaking former economics journalist, he came to prominence after the conservative Helmut Kohl surprised many and reappointed him. He famously warned Kohl against rushing ahead with German unification based on a one-to-one valuation of the east German mark with its West German equivalent, fearing the collapse of the east’s uncompetitive export industries. He said the same about the implementation of the euro. Kohl ignored him. East Germany’s industrial base collapsed. After the 2008 financial crisis, southern Europe erupted in riots, with protesters blaming the euro for their ills.Mario Draghi If Pöhl laid the foundation stones for the euro, Draghi prevented the currency from toppling over. In 2012, after campaigns in several member states to quit the euro – notably in Greece and Italy – triggered panic in financial markets, he said the single currency was “irreversible” and famously pledged to do “whatever it takes” to save it.As president of the European Central Bank from 2011 to 2019, which absorbed most of the powers from 19 member states’ central banks on its creation in 1999, he drew a line under the destabilising debate about the currency’s future. After he stepped down, the Nobel prize-winning economist Paul Krugman described him as “[arguably] the greatest central banker of modern times”.Mark Carney Carney was governor of the Bank of England from 2013 to March this year. He was appointed by the chancellor at the time, George Osborne, who courted him for a year and called the former Goldman Sachs banker and head of Canada’s central bank “the outstanding central banker of his generation”. Yet within a year, he was likened to an “unreliable boyfriend” who failed to match his promises with action. This followed a series of overly optimistic forecasts that led many to prepare for an increase in interest rates that never came. Carney, more polished and dapper than his contemporaries, recovered much of his reputation in 2016 when he was dubbed “the only adult in the room” following the Brexit referendum. While parliament went into shock and No 10 was consumed by the resignation of David Cameron, Carney toured the TV and radio stations, calming fraying nerves.Raghuram Rajan The Chicago Booth economics professor is often described as one of the few economists to predict the financial crisis. In a speech in 2005 to the world’s top central bankers he explained that an explosion of borrowing made financial markets more dangerous. At the time he was chief economist at the International Monetary Fund, so he might have expected his warning that “it’s possible these developments are creating a greater (albeit still small) probability of a catastrophic meltdown” would be taken seriously. It wasn’t.He took over as governor of India’s central bank in 2013 after warning that the country was suffering from hubris, adding that “growth can never be taken for granted” and that “self-delusion is the first step towards disaster”. The rupee, which tumbled 12% against the dollar in the three months before his arrival, stabilised. By the time he left in 2016, price inflation had fallen from almost 10% to below 4% and a series of banking reforms were in place.Christine Lagarde As president of the European Central Bank since last year, Lagarde has shown she is a would-be central bank hero. Shifting the dial at an institution covering 19 countries is never easy, but the former boss of the IMF has embarked on a campaign for greater transparency in a break from the traditionally closeted bank’s decision-making, and for unemployment and inequality to be as much of a yardstick for the ECB as inflation. She has also matched Carney in the drive to make central bank lending more climate-friendly, with green bonds that only allow loans to businesses that are environmentally friendly. PI More

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    'Move with urgency': Joe Biden's economic team in their own words

    Joe Biden’s incoming economic team is filled with firsts. The lineup that the incoming president introduced this week will, if approved, place women and people of color at the controls of the US economy during one of the darkest periods in recent history.
    While the team is historic, it also faces a historic challenge. Unemployment has fallen dramatically since the early days of the coronavirus pandemic. It fell to 6.7% in November. But it remains 3.2 percentage points above its level before Covid-19 struck, jobs growth is slowing sharply, long-term unemployment is growing and people of color are still suffering hardship at far higher levels than white Americans.
    The pandemic has also exacerbated already worrying levels of income inequality, and across the US, shocking lines are forming at food banks as the country’s already frayed social safety net collapses.
    Congress has been deadlocked on a new round of stimulus money for months. A compromise now seems to be in the works but will come too late for many.
    The future looks difficult too. The US now has a $21.2tn national debt – up from $14.4tn on the day Donald Trump was inaugurated. Republicans, who helped fuel that enormous rise, are now talking about the need for fiscal responsibility.
    Biden’s team is strong on progressive talk. Its members have championed the need for more government intervention, greater equality and a stronger safety net. A look at the team’s own words shows just how ambitiously they are thinking.
    Whether they can achieve those goals looks set to hang on two crucial Senate races in Georgia in January that will decide who controls the Senate.
    Janet Yellen, treasury secretary
    The first woman to head the Treasury if confirmed, Yellen has had a long and distinguished career and was the first woman to head the Federal Reserve.
    This week Yellen called the pandemic recession “an American tragedy” and said: “It’s essential that we move with urgency.”
    An expert on labor markets, she has long highlighted income inequality and its disproportionate impact on people of color in the US. “There really is a new kind of recognition that you’ve got a society where capitalism is beginning to run amok and needs to be readjusted,” she told Reuters recently.
    In a 2014 speech, she said: “The extent of and continuing increase in inequality in the United States greatly concern me.” Yellen noted: “The distribution of income and wealth in the United States has been widening more or less steadily for several decades, to a greater extent than in most advanced countries.”
    But her long-term views on the nation’s debts have some progressives worried that she may look to cut welfare programs once Covid-19 is, finally, behind us. “The US debt path is completely unsustainable under current tax and spending plans,” she said in February.
    Neera Tanden, head the Office of Management and Budget (OMB)
    The president of the left-leaning Center for American Progress will be the first woman of color to head the OMB if she is confirmed. But Republicans, angered by her partisan tweets, have said she stands “zero chance” of being approved if they keep control of the Senate.

    Neera Tanden
    (@neeratanden)
    Imagine a world where Mitch McConnell is not in the Senate. Now let’s go make that happen. https://t.co/iOwO3GgDf1

    February 13, 2019

    Her India-born mother, Maya, relied on food stamps and other government programs to raise her children after her divorce and Tanden is a strong supporter of a better social safety net.
    “I’m here today thanks to my mother’s grit, but also thanks to a country that had faith in us, that invested in her humanity, and in our dreams,” she said this week.
    The OMB is the largest office within the executive office of the president and oversees the development and implementation of the federal budget. Her priorities are unmistakable.
    “Budgets are not abstractions,” Tanden said. “They are a reflection of our values. They touch our lives in profound ways and sometimes they make all the difference.”
    Adewale ‘Wally’ Adeyemo, deputy treasury secretary
    If confirmed, Nigerian-born Adeyemo will be the first Black person to serve as deputy Treasury secretary.
    “Public service is about offering hope through the dark times and making sure that our economy works not just for the wealthy, but for the hard-working people who make it run,” he wrote on Twitter this week.
    Like Yellen he has emphasized the need to address income inequality. “In California’s Inland Empire, where I had grown up in a working-class neighborhood, the Great Recession hit us hard,” he said this week. “We were one of the foreclosure capitals of the United States. The pain of this was real for me.”
    But his work as a senior adviser to BlackRock, the world’s largest asset manager, and past positions calling for “avoiding protectionism” and asserting the need to join the Trans-Pacific Partnership trade deal are likely to cause problems with progressive Democrats and even many Republicans in the post-Trump era.
    Cecilia Rouse, chair of the Council of Economic Advisers
    Another first, Rouse will be the first Black chair of the Council of Economic Advisers if she is confirmed.
    Currently dean of the Princeton School of Public and International Affairs, Rouse is another expert in labor markets. Among her most famous research papers is a study of sexism in auditions and hiring for symphony orchestras.
    An expert on the impact of education on the labor force and long-term unemployment, Rouse has also championed paid sick leave. Last year, nearly 34 million workers – about a quarter of the US workforce – lacked paid sick leave.
    While supportive of the private sector, she recently wrote that the pandemic had exposed “a ‘Franken-system’ of support that is inadequate, costly, unnecessarily bureaucratic, and ultimately not trusted by many Americans”. More

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    'Help is on the way,' says Joe Biden as he announces new economic team – video

    US president-elect Joe Biden has formally introduced his choices for top economic advisers. ‘Our message to everybody struggling right now is this: help is on the way,’ Biden said. Biden’s nominations would put several women in top economic roles, including Janet Yellen, who if confirmed by the Senate would be the first woman to lead the US treasury in its 231-year history.  Yellen said the economic impact of the pandemic was ‘an American tragedy’
    ‘Help is on the way’: Joe Biden introduces economic team as pandemic rages
    Bipartisan group pitches $908bn Covid-19 relief to break deadlock in Congress More

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    Former Fed chair Janet Yellen set to become first female treasury secretary

    Janet Yellen, the first woman to chair the US Federal Reserve, is set to achieve another first, becoming the country’s first female treasury secretary.
    The 74-year-old economist is expected to be named as President-elect Joe Biden’s choice on Tuesday.
    Yellen will take the job during one of the most trying economic times in modern history.
    US unemployment hit a postwar record in April, in the first wave of the coronavirus pandemic, and while the jobs situation has improved, the recovery has slowed in recent months as rates of infection have increased.
    Millions remain out of work, and women and people of color have been hit disproportionately hard by the downturn.
    Congress has struggled to reach agreement on a new round of economic spending, the US national debt is at record levels, and relations with the US’s major trading partners are frayed after the Trump administration’s trade wars.
    Donald Trump declined to reappoint Yellen to the Fed chair after his election in 2016, making her the first central bank chief not to serve two terms since the Carter administration. During his campaign Trump said Yellen should be “ashamed” of her policy actions and accused her of keeping interest rates low in order to bolster President Barack Obama’s legacy.
    Cautious and carefully spoken Yellen has made few comments about Trump although when asked last year if she thought Trump “had a grasp” of macroeconomic policy she said: “No I do not.”
    Yellen has recently advocated for more federal spending from Congress to tackle the economic devastation caused by the virus.
    “There is a huge amount of suffering out there. The economy needs the spending,” Yellen said in a September interview.
    Yellen, professor emeritus at the University of California at Berkeley, a former assistant professor at Harvard and a lecturer at the London School of Economics, is an expert in labor markets who has highlighted the economic impact of uneven growth in the jobs market.
    She is married to the Nobel-winning economist and frequent co-author George Akerlof.
    Progressives had been hoping Senator Elizabeth Warren, a staunch critic of Wall Street, might get the job. But with control of the Senate still in the balance, Yellen is a safer pick. After the news broke Warren called Yellen “an outstanding choice.”

    Elizabeth Warren
    (@SenWarren)
    Janet Yellen would be an outstanding choice for Treasury Secretary. She is smart, tough, and principled. As one of the most successful Fed Chairs ever, she has stood up to Wall Street banks, including holding Wells Fargo accountable for cheating working families.

    November 23, 2020

    Biden said last week that his Treasury nominee would be accepted by both the progressive and moderate wings of the Democrat party. Yellen has also in the past attracted bipartisan support, receiving 11 Republican votes for her 2014 confirmation as Fed chair, including the backing of three sitting Republican senators.
    She is also one of the best-connected economists in the world, leading the Fed from 2014 to 2018 after a long career in economic policymaking.
    If appointed, Yellen will not only be the first female Fed chair and treasury secretary, but the first person to have headed both organizations and the White House council of economic advisers. More

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    Can Joe Biden and Kamala Harris unite America after Trump – video explainer

    When Joe Biden formally takes over the presidency in January he will face some of the greatest crises to hit the US in recent history: a pandemic that has killed more than 200,000 Americans, a devastated economy, a rapidly overheating climate and a deeply fractured nation.
    The Guardian’s Lauren Gambino looks at how Biden and the vice-president-elect, Kamala Harris, plan to ‘heal’ the country after four years of Trumpism – and the challenges they will face with the prospect of having to navigate these times without a majority in the Senate
    How Joe Biden beat Donald Trump in the fight for America’s soul – video More

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    How can Joe Biden deal with Donald Trump's obstruction in transition?

    The president-elect can learn from Franklin D Roosevelt’s response to Herbert HooverPresidential transitions are never easy, especially when they involve an incumbent president defeated at the polls. But this time the transition occurs in the midst of an unprecedented crisis. The incumbent refuses to acknowledge the vote as a rejection of his policies and has a visceral dislike for the president-elect, who he accuses of dishonesty and dismisses as too frail to assume the duties of office. He tars his successor as a socialist, an advocate of policies that will put the country on the road to ruin.The year was 1932, and the transition from Herbert Hoover to Franklin D Roosevelt occurred in the midst of an unparalleled economic depression and banking crisis. The outgoing president, Hoover, had an intense aversion to his successor, whose incapacity of concern was not any lack of mental acuity, but rather Roosevelt’s partial paralysis. He called FDR a “chameleon on plaid” and accused him of dealing “from the bottom of the deck”. In his campaign and subsequently, Hoover insinuated that FDR’s socialistic tendencies would put the country on a “march to Moscow”. Continue reading… More

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    Big tech and corporate tax cuts: the targets of Joe Biden's urgent economic plans

    When Joe Biden enters the White House on 20 January, he will face arguably the biggest set of challenges a president has had to tackle since the end of the second world war. The coronavirus is raging through the US, millions of Americans are still losing their jobs each month, and the climate crisis – ignored by the Trump administration – is deepening.
    Biden has set out his economic and policy plans, but without control of the Senate he may struggle to realise them. Official GDP figures for the third quarter showed the size of the economy was still almost 4% below its previous peak, despite a 7.4% recovery from the spring lockdown.
    At present it looks certain that the Democrats will control the House of Representatives, but we will have to wait for the results of special elections in Georgia before we know who controls the Senate. A Republican majority would block many of his proposals.
    Like Donald Trump, Biden can use executive orders – basically presidential decrees – to circumnavigate political roadblocks. While those orders would have major consequences, Biden is likely to struggle to pass significant legislation without Democratic control of both branches of Congress.
    But here are the some of the key elements of Bidenomics.
    Stimulus package More

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    America is a failing state. And establishment politics can’t solve the crisis | Bhaskar Sunkara

    Our country is breaking down, we have no effective leadership, and we’re lagging behind other rich countries. The left needs to provide an answerIn 2020, America has shown itself to be exceptional in the worst possible ways. No other rich country has such a poor public health infrastructure or such a tattered social safety net. America’s levels of both police violence and violent crime find their closest peers in countries like Venezuela and South Africa, not Canada and Germany. And even Cuba and Bosnia and Herzegovina beat the world’s only superpower in infant mortality and other key social indicators. Continue reading… More