Finance Minister 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 that growth is starting faster than expected in 2021.
In a CNBC interview, the leading economic official in the Biden government said that the $ 1.9 billion proposal could help the US return to full service within a year.
‘We think it’s very important to have a great package [that] addresses the pain it caused – 15 million Americans behind on their rent, 24 million adults and 12 million children not having enough to eat, small businesses have failed, “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 great. We think the long-term benefits will outweigh the costs,” she added.
Yellen said she is not worried that all government spending could cause inflation.
“Inflation has been very low for more than a decade, and you know it’s a risk, but it’s a risk that the Federal Reserve has and other instruments to address,” she said. “The greater risk is to injure people, and that this pandemic should permanently claim their lives and livelihoods.”
Her comments come against the backdrop of a brightening economic picture in the US as the Covid-19 pandemic declines.
Recent data shows exceptional strength in retail sales, albeit thanks to the stimulus test of Congress at the end of 2020, as well as the continued increase in real estate and manufacturing. A Atlanta Federal Reserve tracker measuring gross domestic product growth indicates a 9.5% increase in the first quarter.
However, the employment picture remains bleak, with 10 million workers not yet working, including millions linked to government-imposed industrial exclusions in response to the pandemic. Earlier Thursday, the Labor Department reported another 861,000 claims for unemployment benefits last week, which is still much higher than what has been seen since the coronavirus.
It is the displaced workers where Yellen believes the 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’s so much pain in this economy,” Yellen said. “I think these checks will really provide relief, and it will help get our economy going, and thus give people money to spend if we can get out again and go back to our previous lives. So you know that there “Many families are working on the margins. And I think these checks will really help them.”
Paying for the various stimulus initiatives is not something that is administration, and Fed officials are now focusing on it. Congress’s budget office is planning a $ 2.3 billion budget deficit in fiscal 2021, which does not even take into account all the extra spending, and Yellen acknowledged that there would be ‘likely’ tax increases to pay at least a portion which would probably slow down over time. “