Janet Yellen encountered early Republican resistance to President-elect Joe Biden’s $1.9 trillion Covid-19 relief plan in her confirmation hearing to become Treasury secretary Tuesday, as she sought backing for what she described as vital support for the economy.
“Right now, short term, I feel that we can afford what it takes to get the economy back on its feet, to get us through the pandemic,” Yellen told the Senate Finance Committee, highlighting that interest rates are historically low and that debt-servicing payments as a share of the economy are lower today than before the 2008 financial crisis. “It would be a false economy to stint.”
Yellen — who could be confirmed as soon as Thursday according to a timeline presented by the committee’s incoming chairman — said that help for the unemployed and small businesses would provide the “biggest bang for the buck.” She urged lawmakers to “act big” in efforts to rescue an economy battered by the coronavirus.
Republicans are already balking, at both the size and at components tied to longstanding Democratic goals such as raising the minimum wage to $15 an hour and expanding family and medical leave.
“Now is not the time to enact a laundry list of liberal structural economic reforms,” Republican Senator Chuck Grassley said in his opening remarks. He noted that Congress just approved a $900 billion pandemic relief bill in December. He pointed to criticism that Biden’s proposal isn’t well targeted, and said, “It is important to focus efforts on pandemic relief.”
Senator John Thune, the No. 2 Republican in the chamber, asked Yellen “when is it too much” with regard to running up debt to finance increased government spending.
Yellen said that “it’s essential we put the federal budget on a path that’s sustainable” over time, but that the situation will be worse if investments aren’t made now to support economic growth.
“There is an advantage to funding the debt especially when interest rates are very low by issuing long-term debt,” Yellen also said. Asked about whether she’d endorse a debut 50-year bond, she said she would look at “what the market would be like for bonds of that maturity.”
Currently, the longest-maturity debt offered by the Treasury is for 30 years.
GOP Senator Rob Portman of Ohio warned that “we shouldn’t get too comfortable” with low borrowing costs, as that could change. He said the debt-to-gross domestic product ratio is now “frightening.”
Yellen said she anticipates low yields are here to stay, however. While she didn’t specifically mention the Federal Reserve — which she led for four years to February 2018 — the U.S. central bank’s new long-term strategy features letting inflation exceed its 2% target for a time without moving to boost rates.
“The world has changed — I believe the future is likely to bring low interest rates for a long time,” Yellen said. “But of course it is a risk that interest rates can rise and we need to consider that risk as well in crafting a sustainable and responsible policy.”
Among other topics Yellen addressed in the hearing:
- While not specifically endorsing the “strong dollar” policy established in the 1990s, she said the U.S. “does not seek a weaker currency to gain competitive advantage”
- Analysis of states that boosted the minimum wage shows that job losses are “minimal, if anything”
- The Biden administration isprepared to take on China’s “abusive” trade and economic practices, she said. “China is undercutting American companies by dumping products, erecting trade barriers and giving illegal subsidies to corporations”
Related: Yellen Says She Won’t Seek Weaker Dollar, Wants Market-Set Rates
Senator Ron Wyden, the Oregon Democrat who will chair the panel when his party assumes control later this week, said his top priority is “avoiding the mistake the Congress made in the last recession — taking a foot off the gas pedal before a recovery took hold.”
Wyden said that an agreement was made that could allow Yellen’s confirmation vote to go to the Senate floor on Thursday.
Most GOP lawmakers who publicly commented on Biden’s November announcement to appoint her as Treasury secretary were supportive. Yellen built relationships with lawmakers on both sides of the aisle when she served as Fed chair.
“Yellen brings immediate credibility and as we know, credibility is everything in these top jobs,” said Tim Adams, who served as a Treasury undersecretary during the George W. Bush administration and now heads the Institute of International Finance.
Yellen told the panel that she’ll be working with the Biden team on a second anticipated economic package “to get through these dark times.”
Yellen, who specialized as a labor economist early in her career, said that the recession has “disproportionately hit the service sector and the workers who are employed in that sector — and it’s been particularly brutal in its impact on minorities and women.”
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