Harvard University professor Kenneth Rogoff, a former chief economist at the International Monetary Fund, told Morning With Mary that GDP, which is falling at an annualized rate of 1.4%, is “even below the worst” of the he thought it could have been.
Treasury Secretary Janet Yellen on Thursday defended President Biden’s nearly $2 trillion COVID-19 stimulus bill amid criticism that the burst in government spending helped accelerate the highest inflation in 40 years.
Yellen has helped the White House sell the $1.9 trillion American Rescue Plan, which pumped money directly into homes, businesses and local governments to keep them afloat during the COVID-19 pandemic when the government increased vaccine distribution.
ONE OF BIDENS FAVORITE ECONOMISTS SEEES A HIGH CHANCE OF A RECESSION IN THE NEXT 2 YEARS
“These reactions played an important role in sparking a robust recovery,” Yellen said in a speech Thursday in Washington. “Notably, America’s bailout plan played a pivotal role in fueling strong growth in 2021, with United States real GDP growth outperforming other advanced economies and our labor market recovering faster than historical experience.”
Treasury Secretary Janet Yellen speaks during a Senate Banking Committee hearing on Capitol Hill in Washington on November 30, 2021. (AP Photo/Andrew Harnik/AP Newsroom)
Yellen’s comments come as Americans grapple with the hottest inflation since 1981, which has rapidly eroded consumer spending power and rattled President Biden’s approval rating.
The White House has identified the Russian war in Ukraine, supply chain shortages and other pandemic-induced disruptions in the economy for the recent price spikes, while GOP lawmakers have placed it on the president’s massive spending agenda. But soaring prices for essential goods are eroding workers’ wages, slowing the US economy’s recovery and forcing the Federal Reserve to aggressively tighten monetary policy.
Yellen argued that the alternative to huge government spending is an economic downturn that “could rival the Great Depression.”
“In the face of this uncertainty, recovery packages tried to protect against tail risk,” she said. “They weren’t just tailored for the middle result.”
People shop for groceries at a supermarket in Glendale, California, January 12, 2022. (Robyn Beck/AFP via Getty Images) / Getty Images)
Still, a recent analysis by the Federal Reserve Bank of San Francisco points to massive government spending during the pandemic as the reason US inflation has risen more than other developed economies.
“Fiscal support measures aimed at counteracting the severity of the economic impact of the pandemic may have contributed to this divergence by raising inflation by about 3 percentage points by the end of 2021,” wrote Òscar Jordà, Celeste Liu, Fernanda Nechio and Fabián Rivera- Reyes in the San Francisco Fed Weekly Economic Letter.
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Federal Reserve Chair Janet Yellen removes her glasses as she testifies before the House Financial Services Committee on Capitol Hill in Washington July 12, 2017. (AP Photo/Jacquelyn Martin/AP Newsroom)
Fear is now mounting on Wall Street that a recession is looming within the next two years as a result of the Russian war in Ukraine, rising inflation and an increasingly tightening Federal Reserve. With CPI at a 40-year high, the US Federal Reserve is quick to hike interest rates to dampen demand.
Goldman Sachs, Bank of America and Deutsche Bank are among the companies forecasting an economic downturn in the coming years.