Vaccine efficacy

When covid-19 vaccines meet the new variants of the virus

A lot depends on blocking transmission not just disease

On february 1st researchers around the world saw the tweet for which they had been waiting: “We say with caution, the magic has started”. 

Eran Segal, a scientist at the Weizmann Institute, had been posting regular updates on the course of Israel’s covid-19 epidemic since its mass vaccination campaign had begun six weeks earlier. 

By February 1st he was seeing the number of hospitalisations dropping significantly among the over-60s—a cohort in which the number vaccinated had reached 70%, seen as a crucial level, three weeks before. 

After an expected but still somewhat nail-biting lag, the vaccine was doing its thing.

By February 6th about 85% of the over-60s in Israel—and 40% of the general population—had received at least one dose of the Pfizer/BioNTech mrna vaccine (or in a few cases the Moderna mrna vaccine) and 75% of the over-60s had received their second dose, too. 

In that age group hospital admissions for covid-19 were about two-thirds what they had been at their peak in January and still falling (see chart 1). 

At the same time, the country as a whole was seeing its caseload rise.

The vaccine was not the only thing which arrived in Israel late last year. 

So did b.1.1.7, a highly contagious variant of sars-cov-2, the virus responsible for covid-19, which was first identified in Britain in September. 

It set about filling up hospital wards in Israel just as it has done in Britain, Ireland and Portugal. 

Despite an extended lockdown it is still doing so.

It is no surprise that sars-cov-2 has evolved new biological tricks over a year spent infecting more than 100m people. 

But the near simultaneous arrival of not just b.1.1.7 but also b.1.351, which is now the dominant strain in South Africa, and p.1, a variant first seen in Brazil, is making the roll-out of mass vaccination more complicated and more confusing than might have been hoped when the first evidence of safe, effective vaccines became available last November. 

How fast the various new variants can spread, how well today’s vaccines work against them and how soon new vaccines better attuned to them—and to the other variants which will turn up over time—become available will determine the course of the pandemic.

Testing the bounds

As of February 10th at least nine vaccines had been authorised for use in one or more countries. 

The Pfizer/BioNTech vaccine, first out of the gate, has now been authorised for use in 61, as well as for emergency use by the who. 

The number of doses administered, 148m, now exceeds the number of confirmed covid-19 cases recorded over the entire course of the pandemic. 

All of the vaccines appear very good at preventing severe cases of covid-19 of the sort that lead to hospitalisation and/or death; in trials which compared the vaccinated with control groups the efficacy with which the various vaccines prevented these outcomes was 85-100%.

Their efficacy against all symptomatic cases of the disease found in trials has been lower, ranging between 66% and 95%. 

Some of that range is down to intrinsic differences between the vaccines. 

Some is down to trials being done according to different protocols and in different populations, sometimes against different variants of the virus. 

It is hard to disentangle such effects. 

The general message, though, is fairly clear. 

The vaccines make serious cases of all sorts very rare, and mild-to-moderate cases caused by the original strain of the virus a lot rarer than they would be otherwise.

That is undoubtedly good news; it lessens the death toll, the suffering and the strain on hospitals. 

But the situation is not perfect. 

For one thing mild and moderate cases can be worse than they sound. 

Many cases of “long covid”, a debilitating form of the disease in which some effects last for months, follow original infections that were not severe enough to require hospital admission. 

It is not yet clear whether long covid is less likely in people who have been vaccinated.

What is more, this pattern of effects does not reveal what the vaccines are doing about transmission. 

As Natalie Dean, a biostatistician at the University of Florida, points out, there are two ways one can imagine a vaccine bringing about the pattern of protection the covid-19 vaccines have been seen to provide (see chart 2). 

In one of them the same number of infections occurs as would occur otherwise, but the consequences of these infections are systematically downgraded. 

Thus almost all of the infections which would lead to severe cases lead to moderate or mild cases, and many of the infections that would have led to moderate or mild cases produce no symptoms at all.

The alternative is that the total number of infections is being reduced, but the ratio of severe to mild to asymptomatic cases stays roughly the same. 

The already low number of deaths and hospitalisations shrinks to something hardly there. 

The number of mild cases is similarly deflated (although, since bigger, remains palpable). 

And so is the number of asymptomatic cases. Indeed, the main difference between the two scenarios is that in one the asymptomatic cases rise, and in the other they fall.

The passing game

In the real world there is almost certainly a bit of both going on: lower infections overall and a lessening of the symptoms that follow, with different vaccines offering different profiles. 

But considering the two extremes is still instructive. 

Vaccines which do little more than downgrade the symptoms will be doing relatively little to stop the spread of the virus. 

Honey-I-shrank-the-infections vaccines, on the other hand, will be making a big dent in the epidemic’s now infamous R number—the number of new infections to which each infection gives rise. 

If you imagine reducing what are known as “non pharmaceutical interventions”—masks, social distancing, shelter at home orders and the like—that difference would begin to matter a lot.

Some people will not be vaccinated, either because of pre-existing conditions which make it dangerous for them, because there isn’t enough vaccine for everyone, or because they choose not to. 

If the vaccines are basically downgrading symptoms, then these unvaccinated people will be at risk. 

If they are making the virus less transmissible that risk will be lessened.

A covid-19 vaccine that is highly effective in preventing transmission will, therefore, be particularly useful. 

According to a model by Imperial College London, all other things being equal, a vaccine that blocks 40% of infections and thus prevents 40% of disease would have a similar impact on the number of covid-19 deaths as a vaccine that got rid of 80% of disease but left infection untouched.
Epidemiologists are waiting with bated breath for results that will tell them how good existing vaccines are at reducing asymptomatic infections and infectiousness. 

Data from Israel suggest that the viral load in swabs from infected individuals is lower if they have been vaccinated. 

Clinical trials of the Oxford/AstraZeneca vaccine suggest that the jab may halve infections as detected by pcr tests. 

Such results suggest that covid-19 vaccines are likely to reduce overall transmission of the virus. 

But understanding quite how much transmission is blocked—and the degree to which some vaccines are better at blocking transmission than others—will take months.

And then there is the further complication of the new variants. 

Vaccines seem to have no particular problem with b.1.1.7. 

It just complicates things by running through the unimmunised parts of the population that bit faster. b.1.351, which has now been found in more than 30 countries, is of greater concern. 

At least three vaccines—those from Oxford/AstraZeneca, J&J and Novavax—have been found to be less effective at stopping it from causing disease than they are against variants elsewhere. 

There is increasing evidence that P.1, now also reported in a number of countries beyond Brazil, also appears to be better at avoiding immunity created by prior infection and by some vaccines.

Countries that have already vaccinated a lot of people could be brought back to square one by the spread of such variants. 

Britain, where 13m people had been vaccinated as of February 10th, and millions more have been infected and thus have some immunity (British studies have found reinfection very rare for at least five months), is trying hard to keep b.1.351 from making inroads in the population. 

Health authorities are mass-testing neighbourhoods where cases of b.1.351 have been spotted and are doing particularly meticulous contact tracing when a case is found. 

Border controls have been tightened.

Eking out an advantage

Not all such new variants can be spotted and stopped at borders. 

Mutations can arise anywhere—sometimes the phone call is coming from inside the house. 

But there may be a limited range of mutations about which people need to worry. 

The new variants all differ from the original virus and from each other in various ways. 

But p.1 and b.1.351 both share a particular mutational quirk—technically called e484k but mercifully nicknamed Eric or Eek—which makes a specific change to the spike protein on the outside of the virus. 

Eek has now been found in some isolates of b.1.1.7. too. 

Researchers are beginning to think that the change Eek represents is what allows those variants to infect people even if they have been vaccinated or previously infected.

It would be great if there were no vaccine-resistant strains. 

But given that there are, the possibility that they are all using the same trick offers a bit of comfort. 

It suggests that Eek may be the best way for new variants to avoid immune responses capable of dealing with the original strain, or at least the way evolution can most easily find. 

If the variants have all converged on the same trick, tweaking vaccines to protect against one may protect against all—and against any later variants to which natural selection teaches the same ruse. 

If the virus had found a whole panoply of ways by which to avoid existing immune responses things would look a lot worse.

Whether or not Eek turns out to be crucial, new ways of broadening immunity are on their way. 

Some vaccine-makers are developing booster shots designed to help people vaccinated with earlier versions of their jabs deal with new variants. 

Others are developing vaccines intended to work for multiple sars-cov-2 variants straight away. 

On February 3rd GlaxoSmithKline and CureVac, a German biotech company with an mrna vaccine in late-stage clinical trials, added their names to those developing such “multivalent” vaccines.

Tweaked covid-19 vaccines will not be required to go through large scale clinical trials to prove their efficacy, any more than updated seasonal flu shots do; small trials that look for markers of immunity in the blood may suffice. 

Britain’s National Health Service, which should be able to vaccinate all adults who choose to be jabbed by the end of the summer, is already starting to make plans for a round of covid-19 booster shots aimed at new variants in the autumn. 

Increased surveillance may yet provide advance warning of which variants need to be dealt with by subsequent tweaks. 

It will take luck, diligence and hard work, but the magic that started at the beginning of this year may be made to last for many years to come.

The Short but Momentous History of Fed QE 

Doug Nolan

Central banking traditionally operated as a judicious and conservative institution, with an overarching mandate of promoting monetary and financial stability. 

Historically, recognition that missteps can impart such profound societal hardship necessitated an incremental and risk averse approach. 

Stability and doing no harm took precedence. 

At least that’s the manner in which central banking has been approached for generations.

The world is now in the throes of history’s greatest experiment in central bank doctrine and operations. 

It’s easy to forget that the Federal Reserve is only about 13 years into experimental QE activism. 

Indeed, central bankers have minimal history for a well-founded assessment of how QE operates, its various impacts and consequences, both intended and unintended. 

The lack of clarity beckons for circumspection. 

It’s also clear that observation and evaluation of QE is left to us. 

Wall Street, of course, is bewitched by the Fed’s powerful tool. 

Meanwhile, the Federal Reserve is these days uninterested in assessing either QE’s effects or risks, while the economic community remains reticent. 

After doubling its balance sheet to $7.4 TN over the past 74 weeks, the Fed is now locked into a policy course that will see an additional $120 billion of liquidity injected into the markets on a monthly basis well into the future.

With 13 years of observation, we know for sure that all QE is not created equal. 

It is important to recall that the initial $1.0 TN of QE back in 2008 was employed to accommodate post-Bubble deleveraging. 

The Fed essentially transferred onto its balance sheet a Trillion of Treasuries and MBS (and some other instruments) accumulated by highly levered institutions during the Bubble period. 

The crisis-response expansion of Federal Reserve Credit was offset by a corresponding contraction of speculative leverage, leaving overall system liquidity only marginally impacted. 

The “QE2” doubling of Fed Credit (to $4.5 TN) between 2011 and 2014 had a much more significant market impact. 

The S&P500 essentially doubled from 1,000 to 2,000, with the Nasdaq100 doubling to surpass 4,000. 

And while y-o-y nominal GDP growth did reach 5% in 2014, for the most part the economy was not overly responsive to QE stimulus. 

Ditto for consumer prices. 

Year-over-year CPI, which rose above 3.5% in 2011, was back below 2% in 2014. 

Clearly, QE2 monetary inflation had a much more pronounced impact on equities prices than on both the consumer price level and economic activity. 

The general economy was in an impaired post-mortgage finance Bubble state, suffering the consequences of years of deep structural maladjustment. 

The housing sector was burdened by post-Bubble Credit impairment and associated deflationary forces, a powerful dynamic fueling disinflation in key segments of the economy. 

Even by 2014, annual growth in total Non-Financial Debt (NFD) of $1.5 TN was the lowest since 2011 and still only two-thirds the level from 2007.

The Fed’s reemployment of QE in September 2019 (with stocks at record highs and unemployment at multi-decade lows) was perilous policy activism. 

Rather than accommodating deleveraging (QE1) or countering disinflationary forces (QE2), the Fed resorted to aggressive QE measures to bolster a faltering Bubble. 

In particular, equities and corporate Credit markets had turned highly speculative. 

At $2.7 TN, NFD in 2018 had expanded the most since 2004 – and this strong Credit expansion continued into 2019. M2 grew a record $968 billion in 2019, or 6.7%. 

Home price inflation had gained momentum, with increasingly powerful inflationary biases having taken hold throughout securities and asset markets. 

Unprecedented QE injections were then commenced last March to forcefully reverse de-risking/deleveraging dynamics – and they were then sustained even as “risk on” speculative leveraging and manic market speculation gathered powerful momentum. 

The current QE backdrop is unprecedented. 

The Fed is creating $120 billion of additional market liquidity on a monthly basis in the face of extreme market developments: unprecedented debt and “money” supply expansion; record stock prices and valuations; the most speculative equities market in generations; booming leveraged speculation; record equities and corporate bond inflows; record corporate debt issuance; unprecedented public market participation; booming equities and options trading volumes; record low junk bond yields; along with overheated markets for IPOs and SPACs. 

Evidenced by the GameStop and cryptocurrency spectacles, the Fed is today throwing additional fuel on historic speculative manias. 

Moreover, our central bank is sticking with its massive “money printing” operation despite previously unfathomable fiscal stimulus – with a two-year federal deficit poised to exceed $6.0 TN – or approaching 30% of GDP. 

NFD likely exceeded $7.0 TN last year, while M2 “money supply” inflated an incredible $3.724 TN, or 24%. 

Harvard Professor Gregory Mankiw (Economic Club of New York Q&A 2/10/21): 

“After the great recession and the pandemic recession that we’re just getting out of now, the Fed’s balance sheet is vastly different – much larger - than it was, say, 15 years ago. 

Now I know this is not the time to shrink it – you’re not. 

But look past this current crisis, look ahead where we might be 15 years from now, do you envision the Fed going back to a smaller balance sheet – having a more modest role in the financial markets as it did in the past – or do you think we’re in a new world where this expanded balance sheet is a permanent fixture of the financial system?”

Federal Reserve Chair Jay Powell: 

“I do want to begin by agreeing with your first point, which is the economy is far away from maximum employment and stable prices – and the balance sheet will be the size that it needs be to provide support to the economy. 

As you know, we’re currently buying assets. 

It’s a key part of what we’re doing in providing overall accommodation to the economy. 

That is our focus. 

We’re not thinking about shrinking the balance sheet, just to be clear…

To get to your real question, in the long-run our balance sheet will be no larger than it needs to be to meet the demand for our liabilities and allow us to implement monetary policy effectively and efficiently. 

So, it really is, in the long-run, it’s demand for our liabilities – the two biggest which are currency and reserves… 

When the pool of assets declines over many years, as it did after the global financial crisis, it really is the public’s demand for our liabilities. 

We will return to a place – gradually with tons of transparency and not beginning anytime soon – to a place where really the size of our balance sheet is set by the public’s demand for our liabilities. 

It won’t be the $20 billion balance sheet that we had in 2005 – and that partly is just that demand for currency has been surprisingly high at a time when in many parts of the world people are declining to use currency. 

Demand for reserves – reserves are the most liquid asset, and they’re in high demand for banks to meet their liquidity requirements and payment utilities and all that. 

The longer-run – we will get back to that. 

We did ultimately do that after the global financial crisis. 

We froze the size of the balance sheet in 2014 – and then as the economy grows the balance sheet shrinks as a percent of GDP. 

In addition, reserves decline as currency and other liabilities sort of organically grow. So, the answer to your question is ‘yes’ with a long explanation.”

Noland: It’s not demand for reserves and currency that will dictate the future size of the Fed’s balance sheet. 

Unparalleled Federal Reserve monetary inflation has accommodated a historic financial Bubble. 

Going forward, the Fed’s role as market liquidity backstop (“lender of last resort”) will ensure ongoing massive asset purchases – with incessant risk of marketplace deleveraging and illiquidity governing an increasingly unwieldy Federal Reserve monetary inflation. 

The system is beyond the point where “normalization” is possible. 

I titled a February 2011 CBB “No Exit” following the Fed’s release of its QE exit strategy. 

Sure, the Fed later in 2014 “froze” balance sheet growth, but only after doubling the balance sheet from 2011 levels and, in less than six years, inflating its holdings by $3.548 TN, or 390%.

The Fed did then shrink assets by $740 billion between December 2014 and August 2019, presenting a deceptively sanguine appraisal with respect to the ease of balance sheet contraction. 

Yet this was a near-zero interest-rate “risk on” backdrop, where the expansion of speculative leverage throughout the marketplace easily absorbed the Fed’s Treasury and MBS sales. 

It proved a fleeting phenomenon. 

The Fed’s 2014-2019 balance sheet contraction was fully reversed in only six months – with assets to set to surpass $8.0 TN later this year.

At this point, it is difficult to envisage a scenario where the Federal Reserve’s balance sheet doesn’t continue to significantly inflate. 

The Fed is currently locked into a flawed strategy of ongoing market liquidity injections with a stated focus on full employment and above target consumer price inflation. 

This liquidity onslaught continues to fuel historic asset inflation and Bubble Dynamics – stocks, bonds, homes, derivatives, private business, cryptocurrencies, collectables, luxury properties, and so on. 

And the greater these Bubbles inflate, the more destabilizing even the contemplation of a Fed “taper” becomes. 

The 10-year Treasury inflation “breakeven rate” added another two bps this week to 2.22%, the high since July 2014. 

Friday’s University of Michigan reading on consumer price inflation saw one-year inflation expectations in February surge to 3.3% (up from December’s 2.5%), also the high since July 2014. 

The Bloomberg Commodities Index closed out the week at the highest level since November 2018 – already up 7.7% y-t-d. Energy prices are surging. 

Ten- and 20-year Treasury yields ended the week at the highs since February.

February 11 – Bloomberg (Amanda Albright): 

“U.S. home prices, fueled by the lowest mortgage rates in history, rose at the fastest pace on record, surpassing the peak from the last property boom in 2005. 

The median price of a single-family home climbed 14.9% to $315,000 in the fourth quarter. 

That was the biggest surge in data going back to 1990… 

The Northeast led the way with a 21% gain…”


“Let’s imagine that your next job is not Fed Chair but a member of Congress. 

Would there be a particular issue you would want to champion – big problems out there we aren’t addressing as a nation that you think are high priorities…?”


“One I will mention that connects a lot with our work here…, it would be great if we had a national strategy to make the U.S. economy as big – the prosperity that the United States economy has as broadly shared as possible – and to have that economy be as big as it could possibly be. 

In other words, the productive capacity of the economy. 

Part of that is investing in the labor force. 

Part of it is having a tax code and regulatory policy that promotes growth. 

Growth is what enables incomes to rise generation upon generation. 

So, we want growth to be high, we also want it to be very widely spread. 

People come to Washington, they work on all these hot political issues, but we don't take a step back and say, ‘Okay, what is the supply side strategy that we need as a country to maximize the potential growth of the United States economy, and also the distribution of that – more broadly inclusive prosperity.’ 

So those are the things I would really want to work on if I were an elected representative.” 

John Maynard Keynes, 1920: 

“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. 

The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

I found myself this week also recalling Dallas Fed President Robert McTeer’s comment from early-February 2001: “If we all join hands together and buy a new SUV, everything will be OK.” 

At the time, I was stunned by McTeer. 

The “tech” Bubble had been pierced and the scope of Bubble mal-investment was being revealed. 

Yet there was no recognition of the Fed’s role in promoting the Bubble or how distorted markets and Bubble excess had negatively impacted investment decisions and the economic structure. 

It was a harbinger of the subsequent 20 years. 

It is impossible to maximize sustainable long-term growth and “broadly inclusive prosperity” during a period of massive monetary inflation, acute market speculative excess and flourishing Bubble Dynamics. 

“What is the supply-side strategy” when the marketplace is so indiscriminate in financing uneconomic businesses and enterprises? 

“If we all just hold hands (and plug noses) and continue to participate in the securities market mania, everything will be okay.” 

The problem is contemporary central bank doctrine has morphed to the point that the prevailing objective is simply to sustain asset inflation. 

And at this point, it’s clear that QE has unleashed a dangerous mania while prolonging “Terminal Phase” excess. 

The current period of free “money” is financing all kinds of crazy crap, and the longer this period of egregious excess continues, the greater the damage to the underlying economic structure. 

The longer this dynamic unfolds, the greater the scope of inequality, animosity and social strife. 

And this gets us back to the critical issue of sound money. 

As a society, it is completely unrealistic to hope sustainable prosperity will somehow emerge from an extended period of Monetary Disorder. 

The underlying insecurity afflicting society will only continue to fester. 

Most will lose faith in an unfair and unjust system, with today’s Bubble excess creating enormous systemic risk. 

A bursting Bubble will inevitably inflict terrible hardship throughout the economy. 

In the meantime, runaway Monetary Inflation creates myriad risks to the fabric of society. 

So, “What is the supply side strategy that we need as a country to maximize the potential growth of the United States?” 

Chair Powell poses the critical question, though it is hopelessly divorced from the reality of a historic monetary inflation, out of control Bubbles, market manias and resulting financial and economic dysfunction. 

The policy focus at this point is little more than a desperate monetary inflation to incite higher markets and more borrowing and spending. 

There is no long-term strategy – how could there be? 

It’s ruinous inflationism. Capitalism has been crippled; the pricing mechanism sabotaged by central bankers hijacking the “cost of money.” 

Markets are broken, with the entire financial apparatus – from the Fed, to Wall Street, to Washington – geared toward imprudent spending and the reckless expansion of non-productive debt. 

Without some semblance of sound money, the notion of sound investment, robust economic structure, real generational income growth, and broadly inclusive prosperity is, most regrettably, nothing more than a pipedream. 

Current policy and market structures ensure instability and persistent hardship. 

Of the Trillions of fiscal spending, only a trickle finds its way toward investment in our future. 

Instead, most will be directed at redistribution measures – a policy approach viewed as necessary to counter systemic inequality. 

How crazy has this all become: Trillions of monetary stimulus stoke Bubble Dynamics and resulting inequality, while Trillions of fiscal stimulus are employed to counteract the inequities promoted by monetary policy activism. 

Meanwhile, China has its own serious issues with monetary inflation and deep structural impairment. 

Aggregate Financing, China’s broad measure of system Credit, expanded $803 billion (second only to March 2020’s $805bn) during January, about 2% ahead of the previous record from January 2020. 

One-year growth of $5.432 TN was 35% ahead of the previous year’s growth and 46% above one-year growth from two years ago. 

Aggregate Financing expanded 13.0% over the past year to $45 TN. 

Aggregate Financing has expanded 57% since the PBOC began reporting this iteration of Credit data four years ago.

China’s financial system traditionally experiences huge lending growth to begin the year. 

Total Bank Loans expanded a record $555 billion during the first month of 2021, up 7% from January 2020. 

Bank Loans were up $3.085 TN y-o-y, an increase of 17.4% from comparable one-year growth from a year ago. 

Corporate Bank Loans increased $396 billion in January, down 11% from January 2020’s $443 billion. 

One-year growth of $1.842 TN was up 22% from comparable 2020 growth, 31% from comparable 2019, and 71% from comparable 2018. 

Corporate Bond issuance added another $58 billion in January, the strongest expansion since April’s $143 billion.

Consumer Loan growth surged to a record $197 billion in January, up from December’s $86 billion and compared to January 2020’s $99 billion. 

Twelve-month growth of $1.320 TN was 20% ahead of one-year growth from the previous year. 

Consumer Loans were up 15.2% in one year, 32% in two years, 56% in three and 133% in five years. 

Government Bonds increased $36 billion in January, the smallest gain since last February. 

However, 12-month growth of $1.211 TN was 47% ahead of comparable growth from one year ago. 

Government Bonds expanded 20% over the past year, 40% over two and 64% in three years.

Curiously, M2 expanded “only” $407 billion in January, down significantly from January 2020 growth ($568bn). 

One-year expansion slowed to 9.4%, the weakest reading since February 2020. 

Over the past three months, M2 growth of $982 billion was down 18.3% from comparable three-month growth from last year. 

Stimulating talk

Republicans test the precise meaning of Joe Biden’s talk of unity

The president has ten Republican votes in the Senate for a sizeable stimulus. Does he want them?


The symmetry is fearful. 

Twelve years ago, another freshly elected Democratic president faced an economic crisis and was forced to devote the first month of his term to crafting a stimulus measure to cushion the blow. 

Joe Biden’s experience then, as Barack Obama’s lieutenant, informs his calculation now. 

Mr Obama succeeded in getting his bill, the American Recovery and Reinvestment Act, but at considerable cost. 

That was not just the literal, gargantuan expense (at least for its time) of $787bn, or nearly $1trn in present dollars, but the steep political cost, too. 

Opposition to Mr Obama’s supposedly spendthrift measure spurred the Tea Party movement, which would eventually morph from deficit hawkery to proto-populism and eventually full-blown Trumpism.

Greater modesty is not the moral Mr Biden seems to have learned from his tutelage in the last recession. 

Rather, he seems worried about being insufficiently bold. 

The enormous stimulus plan he unveiled as his legislative priority, the familiarly named American Rescue Plan, costs $1.9trn, nearly twice as much as Mr Obama’s hotly disputed rescue measure in 2009. 

And it comes after Congress had already passed $4trn-worth of fiscal stimulus to counter the economic fallout from covid-19.

Having been poor practitioners of the fiscal stewardship they preach, Republicans have not yet mustered a rebuke as bellicose as in 2009. 

A counter-offer delivered by ten Republican senators—the number that would be needed to surmount the inevitable threat of a filibuster—costing an estimated $618bn looks modest only on a relative scale. 

A cordial Oval Office meeting between the group of senators and Mr Biden on February 1st was notable both for its length (close to two hours) and its anti-climactic, non-committal resolution. 

How the negotiations play out will be significant beyond just the haggling over a few loose hundred billion. 

They will also determine whether Mr Biden’s aspirations for unity and bipartisan dealmaking are workable, or mere happy talk.

The president’s opening offer is a maximalist agglomeration of Democratic ambitions—left-liberal provisions with varying levels of plausible justification. 

Some, like the $160bn to accelerate vaccine manufacturing and distribution, are plainly needed. 

So too is an extension of the federal top-ups to unemployment benefits, which would otherwise expire in March. 

A temporary boost to earned-income and child-tax credits, which sounds stultifying technocratic, would dent the alarming increases in poverty and food insecurity that researchers have noticed in recent months.

Some of the administration’s other priorities are harder to justify. About a quarter of the fiscal firehose ($463bn) would be aimed at disbursing a third round of direct cheques to most American households. 

The promised amount, $1,400, is of dubious provenance. 

In the waning days of his presidency, Donald Trump briefly flirted with rejecting the previous stimulus bill (worth $900bn) because its $600 cheques were too small. 

He favoured the bigger, rounder number of $2,000—which his own Republican allies in Congress resoundingly rejected. Seeking to make much of this own-goal ahead of critical Senate elections in Georgia, Mr Biden embraced the promise of $2,000 in total (hence a new $1,400 cheque). The president’s own economic advisers are reported to be doubtful of its merits.

Democrats have also been attached to sending an enormous cash infusion to state and local governments since the early days of the pandemic, when they (reasonably) feared huge budgetary shortfalls and the resulting vast layoffs of public workers. 

State and local budgets have in fact done much better than feared—dropping by only 0.7%, according to estimates by the Census Bureau—although this has not much dampened Democratic zeal to provide the funds. 

So much so that the $350bn on offer exceeds the total estimated shortfall in state tax collections over the first nine months of 2020 by a factor of ten. 

The long-held ambition of progressive Democrats to raise the federal minimum wage to $15 an hour is dutifully tacked on as well.

The Republican counter-offer treats many of these additions as an editor might treat the flabby copy of a correspondent. There is no proposed rise in the minimum wage and no bail-out for state budgets in more or less fine shape. 

The proposed spending on vaccinations remains the same, but the direct cheques would be more modest (only $1,000) and, somewhat unusually for Republicans, more aggressively means-tested (limited to people making less than $50,000). 

The plan discards Democratic proposals for more generous means-tested tax credits that are proven anti-poverty policies. 

The $20bn allocated to expeditiously reopen schools, which in some parts of the country have been closed for nearly a full year, is a fraction of the $130bn Mr Biden would like.

Precisely how much stimulus the economy needs after the extraordinary measures taken in 2020 remains difficult to determine. 

Modelling by the Congressional Budget Office projected a faster recovery than before even without any additional spending—real gdp growth is expected to be 4.6% in 2021, and the unemployment rate is projected to drop from 8.1% to 5.7%. 

Given that rosier trajectory and the general oddities of a pandemic-driven economic slump, the benefits of another large stimulus measure are difficult to predict. 

One analysis of the Biden plan by the Brookings Institution, a think-tank, suggests that it would increase real gdp by 4% over the current analysis; another respected macroeconomic modeller, the Penn Wharton Budget Model, estimates that it would contribute a mere 0.6% of growth.

Unlike Mr Obama, Mr Biden has never been mistaken for a remarkable orator. 

His choice of one particular word, “unity”, as the opening theme of his administration is imprecise. 

Mr Biden seems to mean not a return to the era of good feelings but a lower-temperature politics where the party in charge still leads but compromise is to be pursued. 

Some Republicans, tripping over the imprecision, have professed anger and confusion that Mr Biden is in fact pursuing conventional Democratic policies.

Yet for all that, a compromise is now discernable. 

Senate Democrats have already voted to start debate on a budget resolution, which would allow them to pass a compromise-free stimulus bill through a parliamentary procedure called reconciliation, by which budget bills can pass with 51 votes, avoiding a filibuster. 

But Mr Biden’s team appears open to accept means-testing the $1,400 cheques, which would bring the overall cost of the package down significantly. 

Mr Obama mustered only three Republican votes for his stimulus. 

Mr Biden could well improve on that. 

Vaccination Is Not Enough

New variants of the coronavirus are spreading quickly from their places of origin, and there are indications that existing vaccines may be less effective against some of them. Fortunately, we can take advantage of another encouraging development that has received relatively less attention.

Simon Johnson, Anette (Peko) Hosoi, Melea Atkins

WASHINGTON, DC – In the next stage of the fight against COVID-19, can we rely on vaccines alone? 

Although vaccination in the United States and some other countries is beginning to pick up pace, in most countries it hasn’t even begun. 

Meanwhile, new variants of the coronavirus that are impacting other parts of the world have also appeared in the US – and there are indications that existing vaccines may be less effective against some of them.

Fortunately, we can take advantage of another encouraging development that has received relatively less attention. 

In places that have established regular COVID-19 screening tests – at universities, schools, and other places where everyone is tested at least once per week – data from the past six months indicate that infection rates can be kept down to less than 0.5% (one positive person per every 200 people tested each week).

This is significant, because many of these programs operate in places where, according to the official statistics, the reported positivity rate in the surrounding community is much higher – up to 10% in some cases (ten positive people per every 100 tested each week). 

This is true, for example, of public schools in Watertown, Massachusetts and New York City. Even in places where the infection is surging, transmission can be limited in environments such as schools. 

If this low infection rate is truly possible in general, and if the operational procedures that make regular testing possible are scalable, we can operate schools, childcare, and many workplaces in a much safer manner – during and even after rollout of the vaccine.

The reason for these relatively low infection rates in places where people live and work in close quarters is straightforward. Mitigation measures – including wearing good masks, maintaining safe distancing practices, and ensuring adequate ventilation – are effective. 

And regular testing breaks the chain of infection by identifying people who need to be isolated. Testing also helps everyone – teachers, parents, students, staff, and administrators – see that the mitigation measures are working, encouraging compliance and helping to identify weaknesses or breaks in defenses.

Being able to contain infection rates even in school settings is a remarkable achievement, but can it be scaled?

Fortunately, Congress has provided a great deal more funding to support school reopening. 

Massachusetts recently announced a scheme that will apply lessons learned by leading labs, test providers, and schools, and, to help with reopening, financial support will be offered to any school system that would like to implement weekly pooled testing as part of a broader mitigation program. 

Every state can now invent its own version or, we would suggest, combine lessons from what works in other parts of the country. Our public service website,, attempts to support such innovation.

The Massachusetts plan relies on pooled testing, whereby samples of up to 25 people (depending on the lab) are first tested together. 

If there are any positives, follow-up tests are run to “deconvolute” those pools (figure out exactly who is infected). The demonstrated low rates of COVID-19 in schools make this method efficient. 

While it might not make sense to pool samples from a community testing site where the test positivity is upwards of 10%, in a school with a rate of under 0.5%, pooled testing is incredibly efficient. 

This is a viable and robust approach, although there is also hope that more sensitive rapid tests will become more widely available in this context.

The main issue now is to ensure that everyone who wants to participate in such programs can do so. 

Testing is a proven solution: it has been able to keep professional sports teams playing and schools open even in high-prevalence areas. 

Established testing protocols should be made available to more schools and to childcare workers – who have continued working in person throughout the pandemic, despite a lack of access to resources – as we wait for vaccines to effect change in all communities. 

As the new and more contagious variants take hold in the US, being able to track and contain cases in schools will be even more essential to reopening strategies.

Eventually, we will prevail against COVID-19. 

One hopes we can do so sooner and at lower human cost. 

But we also need to ensure that we don’t leave anyone behind in our efforts to bring everyone to a healthier and safer future.

That means wiping out the virus everywhere and among all populations. 

Eradication will be a long haul. 

Combining vaccination, testing, and other mitigation measures is essential to getting there.

Simon Johnson, a former chief economist at the International Monetary Fund, is a professor at MIT's Sloan School of Management and a co-chair of the COVID-19 Policy Alliance. He is the co-author, with Jonathan Gruber, of Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream.

Anette (Peko) Hosoi is Associate Dean of the MIT School of Engineering.

Melea Atkins is a health and economic policy consultant and a founding team member of COVID-19 Response Advisors.

The Empires Strike Back at Europe

Among the many foreign-policy challenges on Europe's plate, few are as pressing as the escalating tensions in the eastern Mediterranean, where Turkey's neo-Ottoman pretensions are threatening European interests. Because Turkey has chosen its own path, the task now is to secure coexistence, rather than integration.

Joschka Fischer

BERLIN – Donald Trump’s presidency is now history, which puts renewing the transatlantic relationship back on the European agenda. 

But there can be no return to the old, cozy dependencies of the Cold War era and the period thereafter, when America – the great protector – decided all important security matters, and Europe followed as a matter of course. 

To renew transatlanticism, Europe will need to make its own contribution to joint security, especially within its own geopolitical environment.

In its immediate neighborhood, the European Union faces three former global powers that are obsessed with their past imperial glory: Russia, Turkey, and now the United Kingdom. 

Each has a unique relationship with Europe, currently as well as historically, and all share some commonalities.

Under President Vladimir Putin, Russia clings longingly to memories of its superpower status, when the Soviet Union was the global equal of the United States. 

Under President Recep Tayyip Erdoğan, Turkey dreams of reprising the Ottoman Empire’s geopolitical and cultural expansion from the Balkans and the western edges of Central Asia to the eastern Mediterranean and the North African coast (Libya), all the way down to the Persian Gulf. 

And, finally, post-Brexit Britain is searching its soul in self-imposed (and not so splendid) isolation, even as it remains close to continental Europeans through NATO and strong cultural and historical ties.

For better or worse, the EU shares the European continent with these three difficult neighbors, and thus must work with each of them to achieve peaceful coexistence. 

Russia, a nuclear power, is too large and militarily powerful for Europe to manage on its own. 

Here, the EU will remain dependent on US protection, especially in the face of Russian threats to Eastern Europe and the Baltic States, which were made manifest with the 2014 annexation of Crimea and the war in eastern Ukraine.

But Europe’s main challenge lies elsewhere: the eastern Mediterranean, where the discovery of substantial natural gas deposits below the seabed has significantly increased the risk of a conflict between NATO members Turkey and Greece, as well as involving EU member state Cyprus. 

Moreover, a NATO mission to stop arms smuggling along the Libyan coast recently precipitated a dangerous confrontation between a French frigate and Turkish navy vessels, resulting in a serious diplomatic contretemps.

In fact, there is no shortage of potential flashpoints in the region, owing to competition for natural gas deposits, Turkey’s intervention in the Libyan civil war, the ancient conflict over the Aegean, longstanding demarcation issues, overflight and maritime rights, and the open question of Cyprus. 

These tensions, which are further aggravated by age-old religious and ethnic rivalries, have created an increasingly dangerous situation on Europe’s doorstep. 

Insofar as its own interests are concerned, Europe will have to deal with this problem itself.

Under Erdoğan, Turkey has been pursuing expansive “neo-Ottoman” policies for several years now. 

Though his Justice and Development Party (AKP) government had initially attempted to accelerate integration with the West by moving toward EU accession, German Chancellor Angela Merkel and then-French President Jacques Chirac firmly closed the door in its face in 2006.

At the time, the global economic boom gave Erdoğan the impression that Turkey could modernize and then re-emerge as a great power on its own, without recourse to European integration. But Erdoğan completely overestimated his country’s capabilities (and still does).

Domestically, Erdoğan relied on a political alliance with the Islamic Gülen movement until the coup attempt in 2016, whereupon he forged a new pact with extreme nationalists. But the change of allies did not diminish the religious component to Erdoğan’s politics. 

He has long emphasized pursuing an Islamic path into the modern age, which represents a departure from the secular tradition established by post-Ottoman Turkey’s founder, Kemal Atatürk. This commitment has ineluctably led Erdoğan away from the West and toward the Middle East.

It is now clear that both the EU and Turkey were caught in a trap of their own making: the prospect of EU membership, which will not be on the table in the foreseeable future. 

Unfortunately, no alternative integration mechanisms are on offer.

But Turkey and the EU cannot simply go their own ways. Europe’s markets, investment capacity, and relations with Turkey’s archrivals Russia and Iran make it indispensable to Turkey; and Turkey’s geopolitical position between Europe, the Middle East, Central Asia, and the Caucasus makes it indispensable to the EU.

Aside from being the ancestral homeland of large minority populations in Germany, Belgium, and Scandinavia, Turkey will continue to serve an important “bridging function” for refugee migration from Asia to Europe. It is imperative, therefore, that both sides develop peaceful ties outside of EU membership.

To be sure, the fiction of Turkey’s long-suspended EU accession process will need to be upheld for the time being; because it remains to be seen who will succeed Erdoğan, formally ending the process at the current moment would do more harm than good. 

But as long as Erdoğan is in power, coexistence is the best that can be hoped for.

Europe must not lose sight of the long game, which inevitably will center on China, not Russia or relations with post-Brexit Britain. China is already establishing a presence in Iran, and demonstrating that it has the capital, know-how, and technology to project power and influence beyond its borders. 

Should it succeed in turning the Belt and Road Initiative into a line of geopolitical stepping-stones, it might soon emerge at Europe’s southeastern border in a form that no one in the EU foresaw.

Europe cannot possibly want such an outcome. The “Turkish question” therefore will remain as relevant as ever.

Joschka Fischer, Germany’s foreign minister and vice chancellor from 1998 to 2005, was a leader of the German Green Party for almost 20 years.