The history of U.S. Treasury ministers points to a variety of background characteristics. There were industrialists like O’Neill and Snow (President Bush’s time). Bush) and Stephen Manuchin (the current era of President Trump) who had appropriate experience in dealing with major financial crises.
There were also finance-politician ministers like Brady (President Reagan and Bush), Bentsen (President Clinton) and Jack Lau (President Obama), who had the skills to “close deals” and deal well with Congress on economic legislation. There was also an exceptional academic economist, Larry Summers (President Clinton).
So what to expect from Janet Yellen, the former Fed chairman and top-notch academic economist? First, Janet Yellen will have a close working relationship with current Fed Chairman Jerome Powell and she will also defend the Fed’s independence and the Mandate for the War on Inflation. Janet Yellen does not appear to be pressuring the Fed to “monetize government debt” by financing the deficit through money printing (what is known as MMT). Since the onset of the crisis, Janet Yellen has repeatedly called for large and extensive fiscal support, and as an academic specializing in labor market issues, she is expected to succeed in designing policies that will get people back to work.
As an outsider to the Biden team, it remains to be seen how much influence Janet Yellen will have on formulating economic policy and the big question is whether she will be able to successfully advance economic plans in Congress where Democrats have a tiny majority. However, Biden is well acquainted with Congress and could contribute greatly to providing backing to Janet Yellen when filing and approving economic legislation.
Key aspects of Democrats’ economic policies under the Biden / Harris administration, with Janet Yellen as finance secretary:
A $ 2 trillion budget package for green energy alongside a $ 1.3 trillion package for infrastructure (over a decade) 1
2. Emphasis in government procurement on local produce and support for local industry.
3. In the future, an attempt to transfer different types of “wealth tax” (raising the tax rates of the upper tier, heavier estate tax), raising corporate tax. The goal: to increase state tax revenues by about $ 4 trillion (over a decade)
4. Reducing the severity of foreign trade conflicts, especially vis-à-vis Europe, and not real change, for better or worse, in the situation vis-à-vis China.
5. Heavier regulation of certain sectors, by extending powers to the supervisory authorities, activating the Attorney General in antitrust investigations and lawsuits and also operating congressional commissions of inquiry. This mainly applies to the following industries: energy, pharma, large technology companies, financial entities. Emphasis on ESG.
6. Given the “tiny” majority in Congress, it will be relatively difficult to pass extensive and rapid legislative moves, but it will be possible to implement many non-legislative measures.
As for the near term:
Towards the end of 2020, a $ 910 billion package (more than 4% of GDP) was approved by Congress.
2. President Joe Biden proposed an additional $ 1.9 trillion budget package.
The package will include a wide range of measures such as forgiving student debts, raising the federal minimum wage, supporting local authorities, health, education, improving unemployment benefits and more.
4. The package will include a key component of increasing the delivery of checks to citizens from $ 600 per person entitled to it in the amount of $ 2,000 (this is up to about 80-90% of households, depending on possible changes in the criteria).
5. What will be approved? It seems that the scope of up to about half of the proposed plan will be approved, ie a package of up to about 4-5% of product.
Possible meanings:
This is a move that will further increase the disposable private income of U.S. households with another “refueling” of the occupied demand awaiting an outbreak in the future.
There are significant potential future inflationary effects.
This is an addition of future basic forces to rising yields in the US.
The Fed, which hampers, but does not completely sterilize, the realization of rising yields, emphasizes that there will be no surprising changes in market intervention policies.