Treasury Secretary Janet Yellen predicted on Friday that a nearly $2 trillion White House spending initiative will help lower rising inflation amid concerns that another burst of government spending will act as an accelerant to already rapidly rising consumer prices.
Speaking from Rome where she is attending the G-20 conference of global leaders, Yellen downplayed concerns that two sprawling spending packages will contribute to a recent bout of inflation that has caused wild swings in consumer prices. She argued that provisions of President Biden's $1.75 trillion ($1,750,000,000,000) climate and family plan and a bipartisan $1.2 trillion ($1,200,000,000,000) core infrastructure bill could actually drive prices lower.
"I don’t think that these investments will drive up inflation at all," Yellen said during an interview with CNBC.
Yellen's comments come amid growing concerns about surging inflation, which has been rising at the fastest pace in more than a decade. In September, the Federal Reserve's favored inflation gauge hit 4.4%, a 30-year high that's well above the U.S. central bank's preferred target of 2%.
Economists have largely attributed the uptick to pandemic-induced bottlenecks in the supply chain, including container ships that are stranded at ports and unloaded goods that are waiting for trucks, which has led to mass shortages and delays. But the rising price of everyday goods is eating into worker pay, slowing the U.S. economic recovery and providing new fodder to Republicans as Democrats look to approve close to $3 trillion in spending.
But Yellen insisted the reconciliation bill, which will give billions in new funding to establish universal pre-kindergarten, expand Medicaid and provide a temporary one-year expansion of the child tax credit, and the infrastructure bill, which includes $550 billion in new funding for traditional projects like roads, bridges and transit, will tame some of those snarls.
"It will boost the economy’s potential to grow, the economy’s supply potential, which tends to push inflation down, not up," she said. "For many American families experiencing inflation, seeing the prices of gas and other things that they buy rise, what this package will do is lower some of the most important costs, what they pay for health care, for child care. It’s anti-inflationary in that sense as well."
Biden unveiled the new Build Back Better framework on Thursday before he departed for the G-20 leaders summit in Rome and a United Nations climate conference in Glasgow, Scotland. The proposal caps weeks of frenetic back-and-forth negotiations between moderate and progressive Democrats over a key aspect of Biden's domestic agenda.
Yellen called the package "transformational," though it notably excludes several top priorities for some left-wing lawmakers, including free community college, paid family leave and Medicare coverage of vision and dental.
"We shouldn't lose sight of all the transformative investments that are in this package and also in the infrastructure package that we also hope will be passed very shortly," Yellen said during a separate interview on CBS News. "These two packages really have an enormous amount that is going to boost economic growth in the United States and finally invest in people, in infrastructure, in research and development."
The framework that Biden rolled out relies on a 15% corporate minimum tax, surtaxes on the top sliver of U.S. households, stricter tax enforcement, taxes on corporate stock buybacks and higher taxes on U.S. companies' foreign earnings.