Treasury Secretary Janet Yellen: ‘We Have To Consider’ Rising Inflation Rates When Doing Stimulus Package
Treasury Secretary Janet Yellen acknowledged during a CNN interview on Sunday that rising inflation rates were a serious concern for the Biden administration as it considers a new pandemic relief package, though she stressed that the administration’s priority is addressing the current “huge economic challenge” and “tremendous suffering in the country.”
Yellen noted during her interview with CNN host Jake Tapper the various challenges that are currently facing the U.S. economy, including the number of people unemployed, schools being closed, small businesses that are closing, first responders that have lost their jobs, and people who do not have enough food to eat.
“So, we need a package that’s big enough to address this full range of needs. And I believe that the American Rescue Plan is up to the job,” said Yellen. “My predecessor has indicated that there’s a chance that this will cause inflation to rise. And that’s also a risk that we have to consider. I have spent many years studying inflation and worrying about inflation.”
“And I can tell you, we have the tools to deal with that risk if it materializes,” she claimed. “But we face a huge economic challenge here and tremendous suffering in the country. We have got to address that. That’s the biggest risk.”
A report by the Mercatus Center stated that if the Federal Reserve wants to keep inflation down to around two percent that it will “need to reverse the growth of M1 as the coronavirus pandemic recedes, and as the pandemic-related surge in the real demand to hold money recedes with it.”
“Economists Antony Davies and James R. Harrigan write that ‘the Federal Reserve has reached a point wherein it has little choice but to monetize federal deficits. Sooner or later, we will all pay the price in the form of massive inflation,’” the report warned. “Although ‘sooner or later’” is open-ended as to timing, Davies and Harrigan suggest that ongoing larger deficits will compel an ongoing higher rate of money-printing and thus ‘will give us sustained and significant inflation.’”
JAKE TAPPER, CNN HOST: Joining us now for her first interview on CNN since being confirmed, Treasury Secretary Janet Yellen.
Secretary Yellen, congratulations, and thanks for joining us.
President Biden and Democrats are pushing forward with this $1.9 trillion relief package. But as you know, one of your predecessors from the Clinton and Obama administration, Larry Summers suggested that it’s just too big, it would flood the economy with too much money, and that could lead to rising inflation.
Quote: “Whereas the Obama stimulus was about half as large as the output shortfall, the proposed Biden stimulus is three times as large as the projected shortfall.”
Why is Summers wrong? Why are you confident this will not cause rising inflation?
JANET YELLEN, U.S. TREASURY SECRETARY: Well, first, Jake, thank you for having me. It’s a pleasure to be with you.
I think the risks here — as Treasury secretary, I have to worry about all of the risks to the economy. And the most important risk is that we leave workers and communities scarred by the pandemic and the economic toll that it — that it’s taken, that we don’t do enough to address the pandemic and the public health issues, that we don’t get our kids back to school.
We have 10 million Americans who are unemployed, another four million who have dropped out of the labor force, particularly women who have child care responsibilities. We need to reopen our schools, make sure that children aren’t falling behind, provide help.
We already have way too many small businesses that are closing. We need to provide help to get them to the other side. And we have already seen 1.3 million state and local government workers, first responders, policemen,firemen who’ve lost their jobs. And we need to get them back on the payroll.
And people are on the verge of losing the roofs so for their heads. The package provides rental assistance. We have 24 million adults and 12 million children that are going hungry every day. And we need to provide them with food. We have people suffering, particularly low- wage workers and minorities, and through absolutely no fault of their own.
We have to get them to the other side and make sure this doesn’t take a permanent toll on their lives.
TAPPER: Right.
YELLEN: So, we need a package that’s big enough to address this full range of needs. And I believe that the American Rescue Plan is up to the job.
My predecessor has indicated that there’s a chance that this will cause inflation to rise. And that’s also a risk that we have to consider. I have spent many years studying inflation and worrying about inflation.
And I can tell you, we have the tools to deal with that risk if it materializes. But we face a huge economic challenge here and tremendous suffering in the country. We have got to address that. That’s the biggest risk.
TAPPER: And, as you noted, the unemployment rate is falling. And that does not take into account the millions of Americans who have left the labor force completely during the pandemic. I think 400,000 or so in the latest jobs report just gave up looking.
After the Great Recession, it took almost seven years to get employment numbers back to where they were. How long do you think it will take now to fully recover all the jobs we lost during this pandemic, including all the people who are jobless and have given up?
YELLEN: Well the Congressional Budget Office issued an analysis recently.
And it showed that, if we don’t provide additional support, the unemployment rate is going to stay elevated for years to come. It would take until 2025 in order to get the unemployment rate down to 4 percent again. We would have a long, slow recovery, like we had after the financial crisis.
But this package is going to really speed recovery. And analysis by Moody’s and the economists at the Brookings Institution show that very clearly that we will get people back to work much sooner with this — with this package. And that’s really critically important.
TAPPER: Do you…
YELLEN: There’s absolutely no reason why we should suffer through a long, slow recovery.
TAPPER: Do you have a timeline, though, for full reemployment?
YELLEN: Well, I would expect that, if this package is passed, that we would get back to full employment next year. TAPPER: One of the main discussions right now in the legislation is
about who should receive the direct payments from the stimulus package.
Almost every senator agreed with a resolution that passed on Thursday to say that upper-income taxpayers should not get direct payments. They did not define what constitutes an upper-income taxpayer, which maybe is why it was so easy for them to pass it.
What do you think the cutoff should be, $50,000, $75,000? Where do you come down?
YELLEN: Well, President Biden is certainly willing to work with members of Congress to define what’s fair. And he wouldn’t want to see a household making over $300,000 receive these payments.
But if you think about an elementary school teacher or a policeman making $60,000 a year, and faced with children who are out of school and people who may have had to withdraw from the labor force in order to take care of them and many extra burdens, I would — he thinks, and I would certainly agree, that it’s appropriate for people there to get support.
So, the exact details of how it should be targeted are to be determined, but struggling middle-class families need help, too.
TAPPER: So, you’re not — so, you definitely think higher than $50,000 per individual, but you’re not necessarily willing to commit to $75,000, is what I’m hearing.
YELLEN: Yes, I — I think the details can be worked out. And the president is certainly willing to work with Congress to find a good structure for these payments.
TAPPER: So, “The Washington Post” editorial board is still pushing for a bipartisan deal.
They wrote just yesterday — quote — “Biden should exhaust the possibilities for compromise on COVID relief.”
But President Biden has also signaled he’s ready to move forward without Republicans. Are you, is the administration willing to pass this relief package with zero Republican votes in the Senate, zero Republican votes in the House?
YELLEN: President Biden is strongly committed to working with all members of Congress in order to try to craft a package that addresses the needs of the American people.
And, as you know, he’s met with Republicans who are interested in working with him to craft a proposal. The details of the package certainly can be negotiated over to try to craft something that’s broadly acceptable. But we need a big package. And we need to get this done quickly. And
those are the things that the president is really committed to. So, he wants to make sure that all the needs of the American people are addressed. It’s important to do — to extend unemployment insurance. It’s important to have enough money to distribute the vaccine.
But there are many more needs out there. And he wants a package that addresses rental assistance, so people have roofs over their head, food, that they have enough to eat, and the full range of problems facing Americans.
TAPPER: You met with regulators from the Securities and Exchange Commission and the Federal Reserve on Thursday about GameStop and other stocks after day traders drove the prices to soar and then crash.
Your department says that the market’s — quote — “core infrastructure was resilient” — unquote.
Does that mean you think new regulations are not necessary?
YELLEN: Well, first — the first thing is that we really need to understand exactly what happened.
And the Securities and Exchange Commission is working hard to assemble a report that gives us the facts. And when we have them, we can look at whether or not there were issues that need to be addressed through new policy or regulations.
We need to make sure the markets function efficiently, that investors are protected, and also that they understand the risks that they face when they engage in trading. And all of that will be reviewed.
TAPPER: Let me ask you, because you have made more than $7 million in recent years giving speeches to Wall Street banks, corporations, industry groups, including Citadel, a hedge fund that recently bailed out a GameStop short seller.
You must know that a lot of people who pay these high sums of money for speeches like from experts such as you are hoping not just to hear a good speech, but hoping to get friendly treatment down the line.
YELLEN: Well, I have an ethics agreement that I signed that carefully considered whether or not there could be conflicts of interest. And I will religiously adhere to that agreement.
And, at every step along the way, I have consulted with ethics lawyers at the Treasury Department and will certainly abide by my ethics obligations.
TAPPER: You’re the first woman to ever be confirmed as Treasury secretary in the history of the United States, kind of astounding, frankly, after a very, very long line of 77 men who preceded you.
Take a listen to something you said back in 1998, when you were the chair of the Council of Economic Advisers for then President Bill Clinton.
(BEGIN VIDEO CLIP, 1998)
YELLEN: The bad news, though, is that there remains a significant differential between women’s and men’s pay. On average, women now earn about 75 percent of what men earn.
(END VIDEO CLIP)
TAPPER: More than 20 years later, women earn just 81 percent of what men earn. It’s progress, but not particularly enough.
Where do you want that number to be when your term as Treasury secretary is done?
YELLEN: Well, I would like there to be equal pay for equal work.
And I would like to see the barriers that remain that impede the progress of women in the labor force addressed. Once upon a time, labor force participation of women in the United States exceeded that of most European countries.
The opposite is true now of Europe and other developed countries. And big differences are the availability of child care and paid family and medical leave. And these are things I think we need to work on in order to make it easier for women to work and to combine work with family life.
TAPPER: All right, Treasury Secretary Janet Yellen, thanks so much. Congratulations again on your trailblazing appointment.
We appreciate your being here today.
YELLEN: Thanks so much for having me.
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