Washington — At her confirmation hearing in early 2021, Treasury Secretary Janet L. Yellen told legislators that it was time to “act big” on the pandemic relief package, and concerns about deficits at permanently low interest rates. Disregarded and warned not to act, which could mean a widespread economic “scar”.
A year and a half later, prices have soared and interest rates have risen. As a result, Yellen’s role in developing and selling the $ 1.9 trillion US bailout plan passed by Congress last March is intensifying criticism to identify the person responsible for the highest inflation rate in 40 years. It is analyzed in. .. Yellen admitted last week that it was “wrong” after months of price increases due to a temporary supply chain problem that would disappear, putting the Biden administration on the defensive and political. I threw myself in the midst of a storm.
“I think we were wrong about the path of inflation at the time,” Yellen said in an interview. CNNHe added that the economy was facing an unexpected “shock” that would raise food and energy prices.
Republicans, who have spent months blaming President Biden and Democrats for rising prices, as evidence that the administration has mismanaged the economy and should not be trusted to maintain political control. , Happily caught the entrance.
The Treasury has scrambled to clarify Mr. Yellen’s remarks. She said her misunderstanding of inflation meant that she could not foresee progress such as the war in Ukraine, a new variant of the coronavirus, and the blockade in China. After Yellen’s excerpts suggested that he supported a stimulus less than $ 1.9 trillion approved by Congress last year, the Treasury issued a statement denying that she urged more spending restraints. ..
Yellen could face tough questions about inflation when he testified at the Senate Finance Committee on Tuesday during this sparse moment during his tenure, and similar questions when he appeared in front of Congressman on Wednesday. There is sex. While the hearing is ostensibly about the president’s budget demands for fiscal year 2023, the Republican Party has blamed Mr. Biden’s policies, including a $ 1.9 trillion stimulus for high prices for consumer products. Yellen’s comments gave them the point to throw his first term as a failure.
“How can Americans trust the Biden administration when the same people who were very wrong are still in charge?” Tommy Piggott, head of the Republican National Committee’s swift response. Stated.
Glitter is particularly unpleasant because Yellen, an economist and former chairman of the Federal Reserve Board, is proud to give honest answers and overcome political conflicts.
Yellen said in a hearing on Tuesday that current inflation levels are “unacceptable.” She pointed out that the main reasons for the high prices were “the impact of pandemics on the supply chain and the impact of supply-side disruptions on the oil and food markets due to Russia’s Ukrainian war.” She said Biden’s proposed clean energy initiative and plans to reform the prescription drug market are ways to reduce costs for Americans.
In recent weeks, Yellen has had to defend the Biden administration’s economic policies, even if fault lines appear within the economic team. She expressed her reservation that there was no progress in rolling back some of the Trump administration’s Chinese tariffs. We see this as a tax on “non-strategic” consumers and hesitate to support student debt forgiveness proposals. Inflation if people can spend more money.
Yellen fired again over the weekend after an excerpt from her next biography showed that she failed to cut the pandemic aid bill because of inflationary concerns. The Treasury issued a rare Saturday statement from Mr Yellen denying that she claimed her package was too large.
“I never encouraged the adoption of a smaller American rescue program package,” she said, claiming that the funds helped the US economy survive the pandemic and collapse from the Russian war in Ukraine.
Mr. Yeren has been pressured by Montana Republican Senator Steve Daines on how much the stimulus has contributed to inflation, despite countries around the world working to raise prices. He insisted that he was pursuing a good fiscal policy.
“Most of the inflation we are experiencing cannot reflect the effects of ARP,” Yellen said.
Yellen also opposed the idea that the expanded child tax credit included in the stimulus package had a significant impact on inflation. She admitted that it could have increased demand and led to a “slight” rise in food prices, which was justified by the fact that more children had access to food, she said. Said.
“It has dramatically reduced child poverty,” Yellen said.
Yellen seemed to move away from some Democrats’ view that corporate greed and profits were the main reason for rising prices.
When asked by Senator Charles E. Glasley, a Republican in Iowa, whether greed was the cause, Yellen accused him.
“I think most of the inflation reflects supply and demand factors,” she said avoiding the problem of greed.
Throughout last year, Mr. Yellen was primarily an avid public lawyer on the Biden administration’s economic agenda. She has had open clashes with critics such as former Treasury Secretary Lawrence H. Summers. Too much irritation It can overheat the economy.
Yellen and many other economists have described inflation as “temporary” for months, and rising prices have exacerbated monthly numbers compared to dissipating supply chain problems. He said it was the result of “basic effects”. Prices fell during the early days of the pandemic.
By May last year, Mr Yellen seemed to admit that the Biden administration’s spending proposals could overheat the economy. She said at the Atlantic Future Economy Summit that policies could spur growth and the Fed may have to intervene in “moderate” interest rate hikes if the economy recovers too much. ..
“Even though the additional spending is relatively small compared to the size of the economy, it may be necessary to raise interest rates somewhat to prevent the economy from overheating,” Yellen said.
However, economic indicators still suggested that inflation remained restrained throughout most of the spring. In an interview with the New York Times last June, Yellen said inflation expectations were in line with the Fed’s 2% target and wages were rising, but there was no “price spiral” on the horizon. Said that. It has the potential to settle inflation.
“We don’t want a long-term over-demand situation in the economy where wage and price pressures are rising and endemic,” she said, adding that she hadn’t seen it happen. rice field.
In the months that followed, as prices continued to rise, Yellen admitted that supply chain problems such as microchips, which are important for a variety of products, including automobiles, were worse than initially perceived. She began to predict that inflation could continue into this year.
“We are ready to abolish the temporary language,” Yellen said at a Reuters-sponsored December event, saying new virus variants have disrupted the economic outlook. “I can agree that it was not a proper explanation of what we are dealing with.”
Jerome H. Powell, Chairman of the FRB, Signaled just a few days ago The Federal Reserve has stopped using the term to describe inflation, indicating that Mr Yellen was inconsistent with other major economic policy makers.
Yellen reiterated on Tuesday that she and Powell “probably could have used better words than temporary words.”
Some Republicans sought Mr Yellen’s resignation, but last week Democrats inside and outside the Biden administration came to her defense.
Summers said in CNN last week that Yellen reflected the views of most mainstream economists last year who curbed inflation, and those false predictions called for a rethinking of the economic model.
“There was no risk of overheating in the consensus.” Mr. Summers said.. “I’ve been wrong many times in my life, but I’ve seen a huge amount of demand pressure rising. Given the bottleneck, it seemed plausible.”
Brian Deese, chairman of the White House National Economic Council, rejected the proposal that Yellen could resign because he is trying to change the way he communicates about the economy.
“Yellen is our chief spokesman for the economy,” Dies told Fox News last week. “It will continue, as it has always been.”
Yellen argued on Tuesday that the US economy was facing a potentially serious recession when Biden took office, and that strong bailouts made sense at the time. She argued that these funds guaranteed the economy to remain strong.
“We recovered faster than any other developed country,” Yellen said. “There is no doubt that inflation is too high. We need to deal with it. We are starting it from a strong standpoint.”
