Treasury Secretary Janet Yellen said Wednesday that stimulus spending signed into law by President Joe Biden to support the U.S. recovery from the Covid-19 pandemic could have contributed “a little” to the country's subsequent inflation problems.
But the widespread price rise that has marred the Democratic administration is essentially “a supply-side phenomenon” attributable to the pandemic itself, Yellen told CNBC's “Money Movers” in an exit interview before resigning her position.
There are “just huge problems in the supply chain,” she said, adding that shortages of critical goods “started to drive prices way up.”
Yellen said she believes the $1.9 trillion Covid relief bill and other spending is needed and did circuitously answer a matter about whether she regrets it.
Instead, she urged Americans to do not forget that the pandemic was “out of control” when Biden took office, with 1000’s of individuals dying from the virus every month and high unemployment rates threatening their livelihoods.
“It was really important to spend the money to alleviate this suffering,” she said.
Yellen also argued that the Biden administration was prioritizing deficit reduction and dismissed critics who pointed to facts like rising U.S. deficits that were slamming 1.8 trillion dollars within the last financial 12 months.
“Interest rate increases have led to higher costs of servicing outstanding debt. That’s a factor that plays a role,” she said. “But discretionary spending is at historically low levels.”
When asked about DOGE, the surface advisory group co-chaired by Elon Musk that was appointed by President-elect Donald Trump to propose massive government spending cuts, Yellen expressed skepticism.
“It’s hard to see how the bill works,” she said.
She noted that “many believe defense spending should increase” and that so-called mandatory spending programs — equivalent to Social Security, Medicaid and Medicare — are widely popular and difficult to chop.
“It’s hard to imagine how you could solve the deficit in this way,” she said.
Yellen, 78, who led the Treasury Department during Biden's four-year term, is about to get replaced by hedge fund manager Scott Bessent.
Yellen said Bessent's extensive market experience could be “a very helpful background” for a candidate looking for to steer the agency answerable for managing the country's financial security.
“I'm pleased to see someone with experience who … will likely take over if confirmed by the Senate,” Yellen said.
As for her own post-tax plans, Yellen said, “I'm going to take a vacation.”
She added that she’s going to likely return to the Brookings Institution “and just write and reflect on my experiences over the last four years.”
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