Yellen pushes for a big stimulus package

Treasury Secretary Janet Yellen on Thursday said the economy needs a large stimulus package to get back on track to the pre-Covid level.  Yellen told CNBC that the $1.9 trillion proposal would be necessary to help the United States achieve full employment in a year.

“We think it’s very important to have a big package [that] addresses the pain this has caused – 15 million Americans behind on their rent, 24 million adults and 12 million children who don’t have enough to eat, small businesses failing,” Yellen said.

The implication to increased government spending could cause inflation in the nearest future as noted by former Treasury Secretary Larry Summers. But Yellen says that is no problem. She mentioned that inflation has been very low in recent times – nearly a decade – and is not much of a risk that the Federal Reserve and others cannot handle. No matter the risk, Yellen believes that it is much of a greater risk to allow millions of Americans to suffer as the coronavirus pandemic continues to impact their lives. If inflation is ever a problem, Yellen says the Treasury Department has the right “tools to deal with the risk.”

“I think the price of doing too little is much higher than the price of doing something big. We think that the benefits will far outweigh the costs in the longer run,” Yellen said.

Although the economy is recovering faster than expected as the Covid-19 pandemic gradually declines. Recent data from different sources have shown significant strength in retail sales, particularly in real estate and manufacturing.

The unemployment rate has also greatly declined, however, millions of Americans remain unemployed as many businesses are yet to recover from the impact of the pandemic. The labor department, on Thursday, reported additional 861,000 unemployment claims last week. Yellen said the U.S. can achieve full employment by 2022 if it acts fast to enact a large stimulus package; otherwise, the economy would risk a slower rebound.

The treasury Secretary suggests that the next stimulus package should mostly focus on displaced workers. She said the low-wage earners, minorities, and women suffer the most from the impact of the pandemic and may face “permanent” damage if the economic recovery is prolonged. U.S. President Joe Biden also wants to send out $1,400 stimulus checks to millions of Americans as soon as possible.

“You know, there’s so much pain in this economy,” Yellen said. “I think these checks really will provide relief and they’ll help jump-start our economy, giving people money to spend when we can get out again and go back to our former lives. So you know, there’re a lot of families that are operating on the margin. And I think these checks will really help them.”

Again, Yellen told CNN that without adequate support, it may take the U.S. labor market until 2025 to recover.