Treasury Secretary Janet Yellen on Thursday said a large stimulus package is still necessary to get the economy back to full strength, despite momentum suggesting that growth is off to a faster start than anticipated in 2021.
In a CNBC interview, the lead economic official in the Biden administration said the $1.9 trillion proposal could help the U.S. get back to full employment in a year.
“We think it’s very important to have a big package [that] addresses the pain this has caused – 15 million Americans behind on their rent, 24 million adults and 12 million children who don’t have enough to eat, small businesses failing,” Yellen told Sara Eisen on “Closing Bell.”
“I think the price of doing too little is much higher than the price of doing something big. We think that the benefits will far outweigh the costs in the longer run,” she added.
Yellen said she’s not worried that all of the government spending could cause inflation down the road.
“Inflation has been very low for over a decade, and you know it’s a risk, but it’s a risk that the Federal Reserve and others have tools to address,” she said. “The greater risk is of scarring the people, having this pandemic take a permanent lifelong toll on their lives and livelihoods.”
Her comments come against the backdrop of a brightening economic picture in the U.S. as the Covid-19 pandemic subsides.
Recent data has shown unusual strength in retail sales, albeit thanks to late-2020 stimulus checks from Congress, as well as continued gains in real estate and manufacturing. A tracker from the Atlanta Federal Reserve that gauges gross domestic product growth is indicating a gain of 9.5% in the first quarter.
However, the employment picture remains murky, with 10 million workers still out of jobs including millions relating to business shutdowns instituted by governments in response to the pandemic. Earlier Thursday, the Labor Department reported another 861,000 claims for jobless benefits last week, still well above anything seen since the coronavirus hit.
It’s those displaced workers where Yellen feels 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 really will provide relief and they’ll help jump-start our economy, giving people money to spend when we can get out again and go back to our former lives. So you know, there’re a lot of families that are operating on the margin. And I think these checks will really help them.”
Paying for the various stimulus initiatives is not something administration and Fed officials are focusing on now. The Congressional Budget Office projects a $2.3 trillion budget deficit in fiscal 2021 not even counting all the added spending, and Yellen acknowledged that there “probably” would be “tax increases to pay for at least part of it that would probably phase in slowly over time.”