What Yellen Must Do

NEW YORK – US President-elect Joe Biden’s decision to appoint Janet Yellen as the next Secretary of the Treasury is good news for America and the world. The United States has survived four years under a mendacious president who has no understanding of, let alone respect for, the rule of law, the principles undergirding democracy and the market economy, or even basic human decency. Not only has Donald Trump spent the weeks since the presidential election spewing lies about non-existent voter fraud; he has also convinced a large majority of his party to embrace these lies, thus revealing the frailty of American democracy.

Undoing the damage will not be easy, especially with the COVID-19 pandemic compounding America’s problems. Fortunately, no one is better equipped – in intellect, experience, values, and interpersonal skills – to deal with today’s economic challenges than Yellen, whom I first met when she was a graduate student at Yale University in the 1960s.

First on the agenda will be recovery from the pandemic. With multiple vaccines in sight, the immediate task is to build a bridge from here to the post-crisis economy. It is too late for a “V-shaped recovery.” Many businesses have gone bankrupt, and many more will do so in the coming weeks and months; household and firm balance sheets are being eviscerated. Worse, headline figures may belie the depth of the crisis. The pandemic has taken a massive toll at the bottom of the income and wealth distribution. Those who have availed themselves of policies to prevent evictions and foreclosures are nonetheless falling deeper into debt, and could soon face a reckoning.