Congressional financial services oversight committees are set this week to examine the status of federal pandemic response efforts and US economic resiliency. The two broad subjects have been cojoined since late March 2020 but public hearings featuring a Treasury Department secretary and chair of the Federal Reserve System cannot be designed for effective fact-finding. It’s very likely Secretary Janet Yellen and Chair Jerome Powell will be subjected to a cornucopia of disjointed campaign speeches rather than relevant questions. None are likely to include a way that could have been better than the applied policies, if general household and markets recovery are the measures.
Flatly put, critiquing macroeconomic policymakers’ responses to the damage posed and, in some cases, done by the novel coronavirus requires one or a few stretches. Surely some members will complain about the politicization of monetary policy predicated on a presumption of lost independence. But asking someone to provide a counterfactual to an unproven premise might prove convincing TV, just not insightful inquiry.
Evidence of US economic resilience is not in short supply. Coordinated loose fiscal and monetary policy over the past seven quarters have been successful by any balanced short-term judgment. Our sense is that the Senate Banking hearing today and the House Financial Services session tomorrow will provide Secretary Yellen and Chair Powell an opportunity to explain the virtues of their organizations’ pandemic responses enabled by Congress.
Large-scale fiscal counter-cyclical efforts by nature involve plenty of uncertainty which can translate into risk of inefficiency. The $5.1 trillion of debt created in a year provides plenty of political targets (listed in the following table). Each bill was bipartisan, comprehensive as measured by stated intent, and supported by large majorities of respondents to polls before and after enactment. Political memories being the shortest of all, members from both parties will likely complain to Yellen and Powell about inequities of deaths, sickness, financial indemnification, or recovery ability. Those realities speak to a dynamic and imperfect economy as much as deficiencies of legislation to fix things emergency responses are not designed to fix.
Relief money stabilized healthcare providers, medical equipment and vaccine manufacturers, households, many people, lots of but not all communities, and contributed to an enviable recovery, warts and all. There was no realistic alternative to the US pandemic effort other than organic healing from a combined medical, social, and economic shock not witnessed in recent history. Our 22V’s strategy team’s latest Covid-19 daily report highlights that while true breakthrough hospitalizations are rising, it remains the case that risk of severe covid infection consequences reside among the unvaccinated. The CARES Act and ARPA stabilized and supported US medical responders resulting in vaccines and other treatments reaching millions of Americans sooner than could have happened absent federal action. We do not expect Yellen or Powell to reach different conclusions.
President Biden is scheduled to speak Wednesday about what the administration wants to accomplish to confront an expected winter infections spike that was expected even before Omicron was detected or named. Much of his address will focus on increasing initial and booster vaccination rates, likely a positive for companies producing the life-saving vaccines. And even a warmer hug to companies holding un-contested intellectual property related to the medicines. Other firms making and assembling rapid detection kits might also benefit from an often-touted White House strategy.
The global value chain is showing signs of improvement. Of the pandemic shock-specific economic consequences of the pandemic, the slowed movement of goods and related price increases focused voters on perceived policy shortcomings. Omicron has people searching for information about the latest variant, so the word “inflation” has fallen from its peak score three weeks of 100 to 56 as of today, according to Google Trends.
Inflation might be the main subtext at today’s Senate hearing, while Wednesday offers House Financial Services Committee members their only quasi-confirmation hearing for Powell. Both panels will test witnesses’ crystal balls, but we are unlikely to hear theories of macroeconomic policy potentially more effective than the facilities and programs the Fed and Treasury, respectively, administered.
