America’s top two economic officials told senators on
Wednesday that the economy is healing but still in a deep hole and that
continued government support is providing a critical lifeline to families and
businesses.
اضافة اعلان
The remarks by Jerome Powell, the Federal Reserve chair, and
Janet Yellen, the Treasury secretary and Powell’s immediate predecessor at the
Fed, before the Senate Banking Committee echoed their testimony before House
lawmakers on Tuesday.
Powell said in his remarks that the government averted the
worst possible outcomes in the pandemic economic recession with its aggressive
spending response and super-low Fed interest rates.
“But the recovery is far from complete. So at the Fed, we
will continue to provide the economy the support that it needs for as long as
it takes,” he said.
Yellen, who pushed hard for the recently passed $1.9
trillion relief package, said responding to a crisis with a needed surge of
temporary spending without paying for it was “appropriate.”
“Longer-run, we do have to raise revenue to support
permanent spending that we want to do,” she said.
She said expanded unemployment insurance, part of the recent
relief package, does not seem to be discouraging work and is needed at a time
when the labor market is not at full strength.
“While unemployment remains high, it’s important to provide
the supplementary relief,” Yellen said, noting that the aid lasts until the
fall. She said the aid should be phased out as the economy recovers.
The Biden administration is also making plans for a $3 trillion
infrastructure package, and Republicans on the committee expressed concern
about the mounting deficits facing the United States.
They also confronted Yellen over her expected support for a
new allocation of $650 billion of the International Monetary Fund’s Special
Drawing Rights, an expansion of its reserves intended to help poor countries
combat the pandemic.
Critics, such as Senator John Kennedy, a Republican from Louisiana, argued that the
United States would be effectively spending money to help adversaries such as
China and Russia. He argued, without explanation, that the decision would cost
the United States $180 billion.
“There is no money to be paid back — it doesn’t matter,”
Yellen told Kennedy. “I don’t know where you got a number like that from.”
Firing back, Kennedy said, “No disrespect, but I think
you’re wrong.”
The fact that the government is spending so much, and
contemplating spending more, at a time when the economy is recovering has also
stoked concerns about inflation among some economists and lawmakers. A few have
voiced concern that the Fed, which has interest rates at rock-bottom and is
buying bonds in big quantities to help the economy, might be too slow to react
if higher prices materialize.
“I do worry that the Fed may be behind the curve when
inflation inevitably picks up,” Senator Patrick Toomey, a Republican from Pennsylvania, said during his
opening remarks.
But Powell has consistently pushed back on warnings about
runaway inflation and did so again on Wednesday.
“We think the inflation dynamics that we’ve seen around the
world for a quarter-century are essentially intact — we’ve got a world that’s
short of demand, with very low inflation,” Powell said. “We think those
dynamics haven’t gone away overnight, and won’t.”
Asked specifically about potential supply and demand
mismatches — particularly in the context of a ship that had gotten stuck in the
Suez Canal, but also in general as the economy reopens — he struck a similarly
unconcerned tone.
“A bottleneck, by definition, is temporary,” he said.
He also batted back concerns about a recent increase in
market-based interest rates. The yield on 10-year Treasury notes, a closely
watched government bond, has moved up since the start of the year.
“Rates have responded to news about vaccination, and
ultimately, about growth,” Powell said. “That has been an orderly process. I
would be concerned if it were not an orderly process, or if conditions were to
tighten to a point where they might threaten our recovery.”
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