By Kate Davidson 

WASHINGTON -- Janet Yellen told lawmakers Tuesday she would make the needs of America's workers her core focus if confirmed as the next U.S. Treasury secretary and ensure the U.S. has a competitive economy that offers good jobs and wages workers in cities and rural areas.

"I will be focused on day one on providing support to America's workers and to small businesses, putting into effect as quickly and efficiently as I can, the relief in the bill that was recently passed, and then over time working for a second package that I think we need to get through these dark times," she told the Senate Finance Committee at her confirmation hearing before a vote on her nomination.

Ms. Yellen said that additional spending that provides relief for struggling families and businesses could provide the most "bang for the buck" for the economy as a whole, including extended jobless benefits and nutrition assistance.

Ms. Yellen also affirmed the U.S.'s commitment to market-determined exchange rates, and she made clear the U.S. doesn't seek a weaker dollar for competitive advantage. She added that efforts by foreign countries to artificially manipulate their currencies are "unacceptable."

She also took aim at China, saying the U.S. should address its "abusive, unfair and illegal practices," including undercutting American companies by dumping products, erecting trade barriers, giving illegal subsidies to corporations and stealing intellectual property.

"These policies, including China's low labor and environmental standards, are practices that we're prepared to use the full array of tools to address," she said.

In her earlier prepared remarks, Ms. Yellen urged lawmakers to "act big" to avert a protracted economic downturn and put aside concerns about the mounting national debt.

"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 said.

President-elect Joe 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. The proposal 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 aimed 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."

Mr. Biden's advisers have argued that the low cost of borrowing and weak 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.

Ms. Yellen said that as Treasury secretary, she would face a "dual mission." The first is to see Americans through the pandemic. "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."

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 starts in earnest Tuesday, said Tony Fratto, a senior Treasury and White House aide in the George W. Bush administration.

"She's a known quantity in terms of testifying there, but I think this is the first time she has had to go to really be something of a salesman on policy before," Mr. Fratto said. "She's the primary spokesperson now."

The Senate confirmation hearing is Ms. Yellen's fifth during her three decades at the forefront of economic policy-making. If confirmed, she will be the first woman to serve as Treasury secretary and the first person to have led the Fed, the Treasury and the White House Council of Economic Advisers.

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.

Ms. Yellen on Tuesday also is expected to affirm the U.S.'s commitment to market-determined exchange rates. And she will make clear the U.S. doesn't seek a weaker dollar for competitive advantage, according to Biden transition officials familiar with her hearing preparation.

Ms. Yellen will likely face questions about whether and when she would agree to establish new emergency lending programs with the Fed, 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 midsize 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 administration.

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 may 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 administration.

Ms. Yellen may face pressure from Democrats to reverse Mr. Mnuchin's refusal to hand President Trump's tax returns to Congress. Democrats may also press her on rules that limit states' ability to help their residents avoid the cap on state and local tax deductions. And they may ask about what they view as company-favorable regulations on international taxes.

She also will pick up where the Trump administration left off on international tax negotiations. Mr. Mnuchin has pushed back against digital-service taxes imposed by France and other countries, which the U.S. says discriminate against U.S. tech companies. Democrats have broadly agreed with that stance. Ms. Yellen will take over amid flailing multilateral negotiations over where corporate profits should be taxed.

Write to Kate Davidson at kate.davidson@wsj.com

 

(END) Dow Jones Newswires

January 19, 2021 12:20 ET (17:20 GMT)

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