WASHINGTON — President Joe Biden’s massive proposed spending on infrastructure, families and education will not fuel inflation because the plans would be phased in gradually over 10 years, Treasury Secretary Janet Yellen said Sunday.
New economic reports have portrayed a surging recovery from the recession unleashed by the coronavirus pandemic. Americans’ incomes soared in March by the most on record, boosted by $1,400 federal stimulus checks, and the economy expanded at a vigorous annual rate of 6.4% in the first three months of the year, leading to concern over inflationary pressures.
Some economists, notably former Treasury Secretary Larry Summers, have warned that the Federal Reserve’s current ultra-low interest rates, along with the Biden administration’s proposed $4 trillion in new spending, atop about $5 trillion already approved by Congress, risk accelerating inflation.
Biden laid out his expansive plans in an address to Congress last week. They would expand the social safety net for children, increase taxes on the wealthy and fund projects that take an ambitious definition of infrastructure, with an eye to stabilizing the economy over the long term with middle-class jobs.
Addressing fears about inflation, Yellen said on NBC’s “Meet the Press” that the proposed spending “comes into effect once the economy is back on track.”
“It’s spread out quite evenly over eight to 10 years. So the boost to demand is moderate,” she said. “I don’t believe that inflation will be an issue, but if it becomes an issue, we have tools to address it.”
Yellen, a former Fed chair, said the central bank “has the tools to redress inflation should it arise.” Fed Chairman Jay Powell has clearly indicated that he does not believe a sharp surge in prices is likely.