US Treasury Secretary, Janet Yellen has intimated that the country is still in a “deep hole” with millions of lost jobs but President Joe Biden’s $1.9 trillion relief plan could generate enough growth to restore full employment by next year.
Republican senators have argued that President Biden’s proposal is too expensive, citing criticism from Larry Summers, a Treasury Secretary under former President Bill Clinton, that passage of the measure could run the risk of triggering runaway inflation. Mr Summers also said that Biden’s plan would make less money available for other initiatives such as improving the nation’s infrastructure.
“Larry Summers is a liberal Democrat … in favour of big government spending and he has said, this is way too much,” said Republican Senator Pat Toomey.
However, Ms Yellen, a former Federal Reserve Chair who is the first woman to lead the US Treasury Department, said the central bank had the tools to handle any potential inflationary threat. She added that the urgent need now is to deal with the problems raised by the pandemic-induced recession; “joblessness, lost small businesses and reopening schools.”
“We face a huge economic challenge here and tremendous suffering in the country. We have got to address that. That’s the biggest risk.”
The government reported on February 6 that the economy only created 49,000 jobs in January after cutting 227,000 jobs in December. Ms Yellen said the recent jobs reports raised fears that the job market is stalling with 10 million people still unemployed and 4 million who have dropped out of the labour market.
“We’re in a deep hole with respect to the job market and a long way to dig out.”
Citing a report from the Congressional Budget Office, she added that the unemployment rate could remain elevated for years to come and it could take until 2025 to get unemployment back to 4%. The jobless rate stood at 3.9% a year ago before the pandemic hit.
She also predicted that if Biden’s relief package is approved, the country could get back to full employment by next year.
“There’s absolutely no reason why we should suffer through a long, slow recovery.”
The Biden package has also been criticized for setting the cutoff for $1,400 direct payments too high, allowing wealthier Americas to collect the payments. Ms Yellen said the administration was willing to negotiate with lawmakers, but did not specify what that threshold should be.
President Biden and his team have argued that a big economic package is needed to avoid the mistakes made in 2009 when the Obama administration was unable to get increased support through Congress, resulting in a long, slow recovery after the 2008 financial crisis.
Last week, the House and Senate approved the legislation necessary to pass President Biden’s package through a process known as reconciliation, which only requires 51 votes in the Senate.
House Speaker Nancy Pelosi, said she hopes to approve the specific budget details of the President Biden proposal over the next two weeks, in other to get the measure through Congress before current unemployment benefits run out in mid-March.
