Treasury Secretary Yellen says spending payments might be anti-inflationary, reducing vital prices

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Treasury Secretary Janet Yellen claimed Friday that the government’s infrastructure spending proposal will bring inflation down by lowering what is essential to households.

Speaking to CNBC from Rome, where she is attending the G-20 conference of global leaders, Yellen renewed her call for White House spending plans, which are unpopular with several factions in Congress and have yet to be approved.

“I don’t think these investments will drive inflation up,” she told CNBC’s Sara Eisen during a live interview with Worldwide Exchange.

The $ 1 trillion infrastructure and associated $ 1.8 trillion climate and social spending plans were cut significantly during negotiations with Congress. The focus is on efforts to improve the country’s infrastructure, through which the Biden government broadly embraced not only traditional investments in roads and bridges, but also through a wide range of social programs such as childcare.

Additional spending has sparked inflation fears at a time when prices are rising almost as fast as they have been in 30 years, but Yellen said the package won’t add to the pressure.

“It will increase the potential for growth in the economy, not the supply potential of the economy, which tends to drive inflation down, not up,” she said. “For many American families experiencing inflation and seeing the prices of gasoline and other things they buy rise, this package will cut some of the most important costs they pay for health care and childcare. It is anti-inflationary “also in this sense.”

Yellen’s remarks come at a difficult time for the US economy.

Not only has inflation risen, but growth has also slowed. Mainly due to supply chain issues that left dozens of ships stranded in US ports, GDP growth slowed to 2% in the third quarter, the slowest rate since the pandemic recession ended in April 2020.

Part of the government’s G-20 agenda will be to address its macroeconomic concerns, including the introduction of a global minimum for corporate taxes, as well as climate change and supply chain problems that have hampered growth and hurt the vacation spending pattern threaten. Yellen said she expected the situation in the supply chain to be “addressed in the medium term”.

She called the White House’s Build Back Better program “transformational” to address the needs of the economy as the nation tries to get out of the Covid-19 pandemic. She insisted that spending plans be “paid in full” through tax proposals aimed primarily at high earners and businesses.

“I think it really helps us to invest in physical capital. That is the public infrastructure that is important for productivity growth, ”she said. “There is investment in human capital, investment in research and development, the support families get to help them get into the labor market.”

Yellen added that she hopes economic growth will accelerate and inflation will decline.

Economic officials, including Federal Reserve Chairman Jerome Powell, are less willing to use the word “temporary” to describe inflation because price pressures have been lingering longer than expected.

Yellen said she still expects inflation to subside over time and return to its longer-term average of around 2%, which is the Fed’s goal.

“I think it’s still fair to use [‘transitory’] in the sense that even if it doesn’t mean a month or two, it means a little longer. I think it shows that the pressures we are seeing are related to a unique shock to the economy. “