Treasury Secretary Janet Yellen said on Thursday that a large stimulus package was still needed to bring the economy back to strength, despite the momentum suggesting that growth will start faster than expected in 2021.
In a CNBC interview, the chief economic officer of the Biden administration said that the $ 1.9 trillion proposal could help the US return to full employment in a year.
“We think it’s very important to have a big package [that] addresses the pain it has caused – 15 million Americans behind their rent, 24 million adults and 12 million children who do not have enough food, small businesses fail, “Yellen told CNBC’s Sara Eisen during a Closing Bell interview.
“I think the price of doing too little is much higher than the price of doing something big. We think the benefits will far outweigh the long-term costs,” she added.
Yellen said she was not worried that all government spending could cause inflation on the road.
“Inflation has been very low for over a decade and you know it’s a risk, but it’s a risk for the Federal Reserve and others to have tools to address,” she said. “The greater the risk is to scar people, so that this pandemic will take a permanent life throughout their lives on their lives and livelihoods.”
Her comments come against the backdrop of a thriving economic image in the United States as the Covid-19 pandemic disappears.
Recent data has shown an unusual strength in retail sales, albeit due to stimulus controls by the end of 2020 by Congress, as well as continued gains in real estate and production. An Atlanta Federal Reserve tracking instrument that measures gross domestic product growth indicates a 9.5% gain in the first quarter.
However, the employment situation remains murky, with 10 million workers out of work, including millions related to the closure of businesses set up by governments in response to the pandemic. Earlier on Thursday, the Department of Labor reported another 861,000 claims for unemployment benefits last week, far more than anything seen since the coronavirus hit.
They are the displaced workers in whom Yellen believes that politics 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’s so much pain in this economy,” Yellen said. “I think these checks will easily provide relief and help start our economy, giving people money to spend when we can go out again and go back to our previous lives. operating in the margin. And I think these checks will really help them. “
Paying for the various stimulus initiatives is not an administrative matter, and Fed officials are now focusing. The Congressional Budget Office projects a $ 2.3 trillion budget deficit in fiscal year 2021, not even taking into account all the added spending, and Yellen acknowledged that it would “probably” be “tax increases to pay little part of it, which would probably be introduced slowly over time. “