Janet Yellen will set out the case for President-elect Joe Biden’s $ 1.9 billion relief proposal at his confirmation hearing as Treasury Secretary on Tuesday, saying “the smartest thing we can do to do is to act big ”.
In prepared remarks obtained by The Financial Times ahead of her appearance before the Senate Finance Committee, Yellen said the United States risks “a longer and more painful recession” and “long-term scars” if it did not act quickly to inject more public spending. in the economy.
The former Federal Reserve chairman also argued that concerns about the growing U.S. budget deficit should take a back seat during this time.
“Neither the president-elect nor I are proposing this back-up plan without an appreciation of the country’s debt burden,” Ms. Yellen said. “But right now, with interest rates at historically low levels, the smartest thing we can do is act big. In the long run, I think the benefits will far outweigh the costs, especially if we are concerned about helping people who have struggled for a very long time.
Ms Yellen’s comments will reinforce those of Mr Biden push for $ 1.9 billion in relief measures, which he outlined last week and wants Congress to urgently pass following his inauguration on Wednesday.
Mr Biden’s plan includes aid to states, direct controls to individuals, an extension of unemployment benefits, an increase in the child tax credit and funding for the coronavirus response. The package would add to the fiscal stimulus already implemented during the pandemic by outgoing President Donald Trump, which included around $ 3 billion in support at the start of the coronavirus crisis, and an additional $ 900 billion during the period of transition.
In her remarks to the Senate committee, Yellen will also say that her goal will be to rebalance the U.S. economy as it recovers from the pandemic, with the aim of addressing some of the deep racial and income disparities in the country. country.
“People are worried about a K-shaped recovery, but long before Covid-19 infected a single American, we were living in a K-shaped economy, an economy where wealth (was) built on wealth as working families fell further and further behind. This is especially true for people of color, ”Ms. Yellen said.
“We need to rebuild our economy so that it creates more prosperity for more people and ensures that American workers can compete in an increasingly competitive global economy,” she added.
While the $ 1.9 billion relief package is the immediate priority, Biden’s team is also preparing a second multibillion-dollar stimulus package that would inject government funds into infrastructure, green energy. , health care and education, at least partially funded by higher taxes on the rich and on corporations.
Several senior Republicans have criticized aspects of Mr Biden’s budget plan before, but others have held firm, suggesting there may be an opening for compromise.
In her prepared testimony, the former Fed President reconsidered the economic conflicts she witnessed as a child near the Brooklyn docks and pledged to pursue the administration’s goals “in a bipartisan fashion. “.
She also suggested lightly that her private life had prepared for her grilling confirmation. She joked that her husband George Akerlof and her son Robert Akerlof were “not just wonderful people; they are also formidable economists – and obstinate ”. She was therefore “used to debating these questions” at home. “I would be happy in the Senate.