Dean Baker refutes the hawks on critics of Janet Yellen

 Janet Yellen Admits She Didn’t See Later Rounds of COVID-19 and the War in Ukraine

Politico has decided to make a big deal out of Treasury Secretary Janet Yellen’s supposedly embarrassing admission that:

“There have been unanticipated and large shocks to the economy that  have boosted energy and food prices and supply bottlenecks that have  affected our economy badly that I didn’t — at the time — didn’t fully  understand, but we recognize that now.”

While Politico’s implication from this “admission” is that the $1.9  trillion American Recovery Plan Biden was a mistake, this is not what  Yellen said. She said that she did not anticipate large shocks to the  economy. Obviously, she is referring to the delta and omicron rounds of  the pandemic, as well as the war in Ukraine.

These subsequent rounds of the pandemic both disrupted production in  the United States and elsewhere, and prevented a more rapid return to  normal consumption patterns. The ongoing disruption of production, due  to the pandemic, prevented supply chains from returning to normal  through the fall and winter, and even now, as China’s exports continue  to face disruptions.

The subsequent waves of COVID-19 also prevented people from returning  to normal consumption patterns. This meant that consumers continued to  spend less than normal amounts on services involving exposure to other  people (restaurants, movies, gyms) and larger than normal amounts of  money on things (televisions, cars, clothes). This continued shift to  goods consumption aggravated supply chain problems.

The war in Ukraine has sent the world price of oil and natural gas  soaring. This has pushed gas prices to near record levels in real terms.  The war has also raised the price of wheat and other agricultural  commodities, as both Russia and Ukraine are major grain exporters.

It’s good that Yellen admitted her failure to see these shocks,  although it’s not clear what different policy the administration should  have pursued if she had seen them coming. The world price of oil, and  therefore the price of gas, would be just as high today if the Biden  administration had not passed its recovery plan.

There is a point here on which the Biden administration certainly can  be criticized, although not one mentioned by Politico. If the Biden  administration had made vaccinating the world a top priority, it is  likely that we would not have seen the development of the omicron  variant and quite possibly also have prevented the delta variant.

The number of mutations of a virus will depends on the extent of its  spread. If we had worked aggressively with other countries to produce  and distribute as many doses of the vaccine as quickly as possible,  overriding patent monopolies and other protections, we could have  prevented hundreds of millions of cases, along with the resulting  sicknesses and death.

The Biden administration ostensibly supported a limited waiver of  patent protection for vaccines, but this support was at best  half-hearted. It really should have been the top priority of the Biden  administration, from day one, to spread the vaccines,  as well as tests and treatments, as widely as possible as quickly as  possible. Clearly this was not the case, and for that it deserves  considerable blame. (Of course, it would have been even better if we  embarked on this path back in March of 2020, but we know Donald Trump doesn’t care about stopping deadly pandemics.)

Anyhow, there was a very serious mistake, for which the Biden  administration deserves to be taken to task big time. Unfortunately, it  is not a mistake that Politico is interested in talking about.