Biden, Yellen, Powell

► Biden is no Roosevelt perhaps, but his administration has not only understood the gravity of the post-COVID situation but also the severity of the social crisis in the U.S.

► So, Yellen has come with a huge fiscal drive that completes the Powell Fed defense line. It is the largest monetary-cum-fiscal expansion package but intentions go beyond that.

► First, the likelihood that a third wave is in the making is increasing. Come next month, we may see clear signs of this. The policy mix addresses this particular calamity because Powell recognizes that unemployment is in fact nearing 10%.

► Second, there are the racism-cum-divided America issues. Third, American industry risks becoming obsolete after almost half a century of so-called neo-liberalism. Biden aims at funding large-scale restructuring such as producing only fully-electric cars within a decade.

► Fourth, climate change, what Al Gore made famous within the American polity but was dismissed by Republicans, is back again. Even the old Stern Report had predicted 3% of GDP public spending to grapple with this issue.

► Yellen also said that some 10 million out of 22 million additional job losses haven’t been recovered, and the new unemployment disproportionally hit Black Americans, the poor, immigrants, and so on.

► However, in the long-run such ambitious path-breaking projects need to be financed out of income and capital taxes. There will be inflation, too. All these would require a social compact similar to the New Deal, I believe.