President Joe Biden’s economic plan is unlikely to create inflation pressure in the U.S. because the boost to demand will be spread over a decade, said Treasury Secretary Janet Yellen.
“I don’t believe that inflation will be an issue. But if it becomes an issue, we have tools to address it,” Yellen, the former Federal Reserve chair, said Sunday on NBC’s “Meet the Press”. “It’s spread out quite evenly over eight to 10 years. So, the boost to demand is moderate,” she said of the proposed spending.
Yellen also said the U.S. has the “fiscal space” to make investments in its economy, with interest rates low and likely to remain so, but over the long haul, budget deficits need to be “contained”.
Another top Biden administration economic adviser said inflation now apparent in certain pockets of the economy is “transitory” as the nation exits the pandemic.
Cecilia Rouse, chair of the White House Council of Economic Advisers, said supply chain issues and labor market shortages are “bumps along the way” to recovery.
There’s no sense for now that these price increases are becoming “de-anchored,” she said on “Fox News Sunday,” while promising to remain vigilant on inflation pressures.
“For the time being we expect at most transitory inflation, that is what we expect coming out of a big recession,” she said.
Yellen and Rouse spoke following last week’s unveiling of the latest economic plan from the Biden administration, which is proposing a combination of $1.8 trillion in spending and tax credits for areas such as education, child care, and paid family and medical leave.
This would come on top of almost $2.25 trillion in infrastructure, home health care and other outlays that the administration proposed at the end of March, not to mention the $5 trillion that the government has injected into the economy through the three pandemic relief packages passed by Congress during the past 14 months.
The massive government spending has helped turbo-charge economic growth and helped drive a stock market rally to record highs. U.S gross domestic product increased at an annualized rate of 6.4% during the first quarter, the Labor Department reported on Thursday. Personal consumption surged at an annualized rate of 10.7%, the second-fastest since the 1960s.Source: Bloomberg