Treasury Secretary Janet Yellen said on Thursday that a major stimulus package is still needed to get the economy back to full strength, despite the momentum suggesting growth will kick off faster than expected in 2021.
In a CNBC interview, the leading economic official in the Biden administration said the $ 1.9 trillion proposal could help the US return to full operation within a year.
“We think it is very important to have a large package [that] addresses the pain this has caused – 15 million Americans are behind on their rent, 24 million adults and 12 million children who don’t have enough to eat, small businesses failing, ”Yellen told CNBC’s Sara Eisen at a“ Closing Bell ” -interview.
“I think the price of doing too little is much higher than the price of something great. We think the longer-term benefits far outweigh the costs,” she added.
Yellen said she is not concerned that all government spending could cause inflation over time.
“Inflation has been very low for over a decade, and you know it’s a risk, but it’s a risk that the Federal Reserve and others have tools to cope with,” she said. “The greater risk is the scars of the people as this pandemic takes a permanent lifelong toll on their lives and livelihoods.”
Her comments come against the backdrop of a brighter US economic picture as the Covid-19 pandemic abates.
Recent data has shown an unusual strength in retail, albeit thanks to stimulus controls from Congress in late 2020, as well as continued gains in real estate and manufacturing. An Atlanta Federal Reserve tracker measuring gross domestic product growth points to a 9.5% gain in the first quarter.
However, the employment picture remains murky: 10 million workers are still out of work, including millions related to the shutdown of companies set up by the government in response to the pandemic. Earlier Thursday, the Labor Department reported a further 861,000 claims for unemployment benefits last week, still well above anything seen since the coronavirus.
It is those displaced people where Yellen believes that policy should be directed. As part of the latest round of stimulus spending, President Joe Biden wants to send $ 1,400 checks to millions of Americans.
“You know, there is so much pain in this economy,” Yellen said. “I think these checks will really provide relief and they will jump-start our economy, give people money to spend when we can go out and go back to our past lives. So there are a lot of families out there. on the margins. And I think these checks will really help them. “
Paying for the various stimulus initiatives is not for the administration and that is what Fed officials are now targeting. The Congressional Budget Office predicts a budget deficit of $ 2.3 trillion by fiscal 2021, not even counting all the additional expenses, and Yellen acknowledged that there would be “likely” tax increases to pay for at least some of it, likely over time. of time would fade. “