President Joe Biden’s $1.9 trillion American Rescue Plan did contribute to inflation, Treasury Secretary Janet Yellen conceded on Wednesday.
Speaking in an interview with Matt Murray, editor-in-chief of The Wall Street Journal, the former head of the Federal Reserve admitted that the White House’s enormous spending had played a role in today’s inflationary environment, adding that it was “justified” due to the various economic risks.
“So, look, inflation is a matter of demand and supply, and the spending that was undertaken in the American Rescue Plan did feed demand,” she said.
She added that today’s 40-year high inflation was an unintended consequence of the Biden administration attempting to avoid a sharp economic downturn and facilitate full employment.
Yellen further explained that the fiscal stimulus and relief package had to support the labor market in response to the many dire forecasts.
“But I do think it was justified and appropriate at the time, given the risks the economy faced,” the treasury secretary stated. “At the time that President Biden was inaugurated, we had an economy where forecasters were envisioning very high unemployment for a very long time. We had especially low-wage workers who had been laid off in massive numbers. We saw cars lined up for miles in food banks, Americans worried about not being able to feed their families, get enough to eat. Forecasts were really quite dire.”
Yellen touched upon the overall economy in her interview, noting that “the outlook is very uncertain” due to the panoply of risks. Some of the threats to the post-crisis economy are surging commodity prices, the spillover effects from the war in Eastern Europe, and broader global growth prospects.
Still, she anticipates solid growth and a potential “soft landing” for the U.S. economy.
“I do believe we’re going to see solid growth in the coming year,” Yellen averred. “The Fed will need to be skillful and also lucky, but I believe it’s a combination that is possible.”
The Federal Reserve raised the benchmark interest rate by 50 basis points on Wednesday, the biggest increase in more than 20 years, to fight inflation. Fed Chair Jerome Powell purported at a press conference after the Federal Open Market Committee (FOMC) policy meeting that he thinks there is “a good chance to have a soft—or softish—landing or outcome.”
Inflation Causes
A March NBC News poll found that 38 percent of Americans blamed Biden and his policies for rampant price inflation.
Another Emerson College Poll reported that 39 percent identified the current administration as the cause of today’s higher cost of living.
By Andrew Moran
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