U.S. Treasury Secretary Janet Yellen on Wednesday made a forceful defense of the Biden administration’s response to the COVID-19 pandemic, arguing that its stimulus spending led to strong growth and prevented the loss of millions of dollars. jobs.
In her last major speech before leaving office on Monday, Yellen said the Biden administration’s stimulus checks, monthly child tax credits and enhanced unemployment benefits reduced key downside risks, noting that Inflation – which skyrocketed around the world – fell earlier in the United States than in other rich countries.
The U.S. economy performed “remarkably well” after the pandemic, outperforming other advanced economies and outperforming previous recessions, Yellen told members of the New York Business Economics Association.
The pace of inflation slowed sharply as supply disruptions eased, he added.
The Biden administration and Democrats in Congress signed into law the $1.9 trillion American Rescue Plan Act in March 2021, following more than $3 trillion in pandemic spending approved during President-elect Donald Trump’s first administration. in 2020.
The actions kept paychecks flowing for idle workers, paid rent and put thousands of dollars directly into Americans’ bank accounts, fueling sharp increases in consumer spending at a time when the economy was hurt by the shortage driven by the pandemic.
Yellen, who last week offered a rare concession that stimulus spending may have contributed “a little” to inflation, insisted Wednesday that it “substantially” made up for the income gaps faced by about 10 million people who lost their jobs or left the workforce at the end of 2020.
But he said the current higher interest rate environment meant the country faced “dire” consequences unless the fiscal deficit was reduced.
Pandemic-era spending averted “significant hardship” and supported demand, allowing Americans to quickly return to work, which in turn helped the United States avoid skills erosion and the consequences of unemployment long-lasting, he said.
A policy aimed solely at avoiding post-pandemic price rises, without taking into account the consequences for employment, would have led to much lower spending or even a contraction of it, he said.
Lower spending would likely have led to much lower output and employment, with potentially millions more people out of work, households without income to meet their financial obligations and lackluster consumer spending, he added.
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