is appearing before lawmakers as she and the Biden administration face scrutiny over high inflation and how they have addressed it.
Ms. Yellen is testifying before the Senate Finance Committee on Tuesday before heading to the House Ways and Means Committee on Wednesday to discuss the administration’s annual budget request. With inflation running at above 8% on an annual basis, the highest rate in four decades, she is also expected to face questions about rising prices, which the Biden administration has said is its top economic priority.
“We currently face macroeconomic challenges, including unacceptable levels of inflation as well as the headwinds associated with the disruptions caused by the pandemic’s effect on supply chains, and the effects of supply side disturbances to oil and food markets resulting from Russia’s war in Ukraine,” she said in her prepared opening statement.
Rising prices for gasoline, groceries and other goods have become a source of frustration within the White House, as many Americans report dim views of the economy despite low unemployment and the rapid recovery from the brief recession in 2020. Biden administration officials, including Ms. Yellen, began a wide-ranging publicity effort this month to try to improve Americans’ feelings and demonstrate their commitment to fighting inflation.
Inflation is already dominating the landscape of the coming midterm elections, when Democrats will be at risk of losing their narrow control of Congress.
Ms. Yellen said during a television appearance last week that she was wrong in 2021 when she said that inflation would quickly ease, an admission that fueled Republican criticism of Democrats’ handling of the economy.
Republicans have for more than a year blamed the $1.9 trillion Covid-19 rescue package passed in March 2021 for sparking inflation, a characterization that Democrats have repeatedly contested.
Ms. Yellen defended the legislation in testimony on Tuesday, saying it has played a central role in driving strong growth and supporting the economic recovery. Excerpts of a coming biography about Ms. Yellen stated that she harbored concerns about the size of the legislation and the impact the spending could have on prices.
Ms. Yellen denied in a statement on Saturday that she had tried to reduce the amount of spending in the $1.9 trillion bill, called the American Rescue Plan, or ARP.
“I believe that ARP played a central role in driving strong growth throughout 2021 and afterward, with the United States real GDP growth outpacing other advanced economies and our labor market recovering faster relative to historical experience,” she said.
Democrats have emphasized the role that disruptions to supply chains and to energy sources by the Covid-19 pandemic and Russia’s invasion of Ukraine have played in raising prices.
Ms. Yellen has said that the rescue plan played an important role in supporting the economy’s recovery and feeding demand—which, in turn, contributes to inflation.
Lawmakers are set to push her further on her views of the relief package and the extent of its role in causing high inflation.
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“A little more than a year ago, Democrats dumped $2 trillion of liberal waste onto our economy. Their own experts told them not to do it,“ Senate Minority Leader
(R., Ky.) said Monday. “It was reported a few days ago that even Secretary Yellen, the president’s own Treasury secretary, knew the spending spree was reckless and wished it were smaller.”
Her testimony comes as several of her legislative priorities are largely stuck in Congress. Lawmakers haven’t approved renewed funding for the Internal Revenue Service that the Biden administration is seeking to increase the amount of owed taxes the government collects. Ms. Yellen is also seeking approval of a new global minimum tax, as well as legislation that would more tightly regulate stablecoins, a type of digital asset whose value is often pegged to the dollar.
Write to Andrew Duehren at [email protected]
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