Treasury Secretary Janet Yellen has vehemently defended trillions of dollars in pandemic aid spending under the Trump and Biden administrations for averting a “Great Depression”-scale disaster
Treasury Secretary Janet Yellen warned during a speech on Thursday that “major negative shocks” to the economy are inevitable as the United States continues to grapple with the ongoing COVID-19 pandemic and the global disruptions caused by Russia’s invasion of Ukraine.
The Biden administration official advocated greater safeguards against financial downturns, warning that they “are likely to continue to challenge the economy.”
She explained that the Great Recession that followed the financial crisis of 2008 taught politicians like her to correct the negative course “as soon as possible”.
Inflation hit a 41-year high of 8.5 percent in March, according to the Labor Department.
The economy’s recovery from the worst of the pandemic has pushed up consumer prices for everything from gasoline to rent to groceries for much of President Joe Biden’s tenure.
The March inflation report, the latest available, showed the full extent of the impact of the Russian invasion on American consumers.
Russia’s autocrat leader Vladimir Putin ordered his unprovoked attack on February 24, disrupting precarious global food and energy supply chains.
However, Yellen’s remarks Thursday before the Brookings Institute omitted any mention of inflation, according to Bloomberg.
Instead, she presented a vehement defense of the president’s COVID-19 spending package, which — along with two similar bills signed by Donald Trump — has been accused by some economists of overstimulating the economy and fueling today’s runaway inflation.
“These reactions played an important role in sparking a robust recovery,” Yellen argued.
Vladimir Putin’s invasion of Ukraine is accused of throwing global energy and food supply chains into chaos
During her speech on Thursday, Yellen made no explicit mention of the recent 41-year high inflation figure when defending Biden’s US bailout plan – which economists say has contributed to rising consumer costs
She added that Biden’s American Rescue Plan and Trump’s packages “played an important role in sparking a robust recovery” in 2021 as public health restrictions began to be lifted and vaccines became available.
However, as inflation surpasses record gains in wages and jobs, it means Biden’s critics and Republican lawmakers could still use consumer price hikes as a political bludgeon.
But on Thursday, Yellen claimed the moves were necessary at a time of sheer “uncertainty”.
“Throughout 2020 and into 2021, the trajectory of the pandemic, including its severity and the role of future virus strains, could not be predicted,” she said.
Failing to provide adequate support to the economy, Yellen said, “could have resulted in a downturn rivaling that of the Great Depression.”
She called on countries to create “recession funds” to prevent what she predicted as virtually certain future economic spirals.
“A better understanding of supply chain disruptions, rising commodity prices, asset bubble bursts, and labor and productivity shocks can help policymakers enact reforms that strengthen our economic resilience,” said Yellen.
The chief financial officer also touted Biden’s electric vehicles and push toward clean energy generation as another way to cushion future market downturns.
Biden’s administration has come under fire from Republicans for refusing to lease new oil and gas drilling permits to mitigate soaring gas prices.
Russia’s disruption to supply lines and the president’s ban on imports of Moscow’s energy have helped push fuel prices to over $6 a gallon in parts of the country last month.
As of Thursday, the average price at the pump in California and Nevada still exceeds $5.
But Yellen said Biden’s push for green fuel as a way to achieve energy independence will “mitigate our future vulnerability to oil price shocks.”
‘At the same time, they will encourage the transition to cleaner energy sources that will, in due course, reduce the risks associated with natural disasters and climate change,’ she explained.
She delivered the remarks just hours after it was announced that the US economy had contracted in the first quarter of 2022.
The country’s gross domestic product (GDP), a broad measure of the health of the economy, fell 1.4 percent in the January-March period, according to the Bureau of Economic Analysis.
It’s the worst economic performance since the pandemic threw US markets into chaos in the second quarter of 2020.
The last quarter of 2021, on the other hand, saw record growth of 6.9 percent.