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Need to Act Big

Yellen seeks a Sweeping Stimulus Package in Face of GOP Skepticism at her confirmation hearing.

“We need to make sure that people aren’t going hungry in America, that they can put food on the table, that they’re not losing their homes and ending up out on the street because of evictions,” Ms. Yellen said. “We really need to address those forms of suffering, and I think we shouldn't compromise on it.”  

If she is confirmed by the Senate as expected, Ms. Yellen will become the administration’s top economic-policy spokesperson responsible for selling President-elect Joe Biden’s $1.9 trillion proposal, which includes another round of stimulus payments, extended jobless benefits, grants for small businesses and a nationwide vaccination program. After that, Ms. Yellen said, long-term investments will be needed in areas such as infrastructure and workforce training to help make the U.S. economy more competitive and productive. 

Delayed or inadequate support, she warned, could lead to a more-protracted economic recovery and cause long-term economic damage in the form of permanent job losses and business closures that could weigh on growth for years to come.  

“It’s really critically important to provide this relief now,” she told lawmakers on the Senate Finance Committee, which will vote on her nomination.

Republican Skepticism 

  • “The only organizing principle that I can discern is it seems to spend as much money as possible, seemingly for the sake of spending it,” Sen. Pat Toomey (R., Pa.) said of Biden's latest plan.
  • Finance Committee Chairman Chuck Grassley of Iowa noted a “laundry list of liberal structural economic reforms” in Mr. Biden’s relief package including a $15 minimum wage.

What About the Debt?

Ms. Yellen acknowledged the government’s mounting debt load, which stands at $21.6 trillion—or roughly 100% of a year’s economic output. But she urged lawmakers to put those concerns aside for now. Interest rates are at historic lows and expected to remain there for some time, making borrowing more affordable, she said.

Put Aside Concerns For Now?

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No, not for now, for ever. 

Borrowing is "affordable" because rates are low. So rack it up. And we have to the tune of $27 trillion in national debt.

Indeed, we have racked up so much debt that it is impossible for the fed to normalize rates. And the fact that the Fed cannot hike rates makes it all affordable. 

Got that? 

I hope so because that is precisely how they think.

Swiss Cheese Thinking 

In case you missed it, please see Janet Yellen's Swiss Cheese Statements on the US Dollar