Yellen Calls for More Aid to Avoid Longer, More Painful Recession -- Update
By Kate Davidson
WASHINGTON -- Janet Yellen, President-elect Joe Biden's choice
for Treasury secretary, plans to tell lawmakers that the U.S. risks
a longer, more painful recession unless Congress approves more aid
and urge them to "act big" to shore up the recovery.
Ms. Yellen is set to testify Tuesday before the Senate Finance
Committee, which is considering her nomination, according to a copy
of her prepared remarks that was viewed by The Wall Street
"Economists don't always agree, but I think there is a consensus
now: Without further action, we risk a longer, more painful
recession now -- and long-term scarring of the economy later," Ms.
Yellen will say. "Over the next few months, we are going to need
more aid to distribute the vaccine; to reopen schools; to help
states keep firefighters and teachers on the job."
Mr. Biden's nomination of Ms. Yellen positions the 74-year-old
labor economist to lead his administration's efforts to advance the
recovery from the destruction caused by the coronavirus pandemic
and related shutdowns. She will also play a key role in pushing the
administration's economic agenda on Capitol Hill, a job that will
start in earnest Tuesday, said Tony Fratto, a senior Treasury and
White House aide in the George W. Bush administration.
Mr. Biden's $1.9 trillion coronavirus relief package, unveiled
last week, provides for another round of direct stimulus payments,
extended and enhanced jobless benefits, funding for schools and
first responders and the creation of a nationwide vaccination
program. It also includes longstanding Democratic priorities, such
as raising the federal minimum wage to $15 an hour and expanding
paid leave for workers.
Republicans have decried the size and scope of the measure,
arguing it would spend more than the economy needs. Some
Republicans and Democrats have also expressed concern about the
growing national debt, which at $21.6 trillion exceeds the annual
output of the U.S. economy.
Ms. Yellen aims to address those concerns in her testimony:
"Neither the President-elect, nor I, propose this relief package
without an appreciation for the country's debt burden. But right
now, with interest rates at historic lows, the smartest thing we
can do is act big."
The hearing comes at a time of growing uncertainty over the
progress of the pandemic, which has killed close to 400,000 people
in the U.S., as well as the state of the economy. Retail sales fell
for the third straight month in December and employers cut jobs,
ending seven months of employment gains.
Mr. Biden's economic advisers have argued that the low cost of
borrowing and weak state of the economy call for larger short-term
deficits to shore up the recovery. But it isn't clear how much of
their broader agenda -- which includes investments in
infrastructure, health care and green energy -- they intend to
finance through borrowing and how much they would offset with new
revenue, such as tax increases on the wealthy.
In her remarks to senators, Ms. Yellen will say that she would
face a "dual mission" as Treasury secretary. Her first task is to
see Americans through the pandemic, she says in her prepared
testimony. "But then there is the longer-term project. We have to
rebuild our economy so that it creates more prosperity for more
people and ensures that American workers can compete in an
increasingly competitive global economy."
Ms. Yellen will likely face questions at Tuesday's hearing about
whether and when she would agree to establish new emergency-lending
programs with the Federal Reserve should the economy need them.
Outgoing Treasury Secretary Steven Mnuchin and Fed Chairman
Jerome Powell set up several such programs during the early months
of the pandemic to keep credit flowing to small and mid-size
businesses and states. But Mr. Mnuchin said he couldn't extend them
beyond their Dec. 31 expiration, drawing criticism from Democrats
who accused him of trying to hamstring the incoming
Republicans argued that the programs are no longer needed and
pushed to include language in the latest stimulus bill that
curtails the Fed and Treasury's ability to resurrect them. They
could press Ms. Yellen for her views on the Treasury's authority to
establish similar programs and the conditions under which she might
take such action.
As Treasury secretary, Ms. Yellen would chair the Financial
Stability Oversight Council, the panel of regulators charged with
monitoring risks in the financial system. Democrats and Republicans
might press her on whether the Treasury would incorporate climate
change into the broader financial regulatory framework, and whether
she sees a more active role for the FSOC in the Biden
Write to Kate Davidson at firstname.lastname@example.org
(END) Dow Jones Newswires
January 18, 2021 16:37 ET (21:37 GMT)
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