Yellen to press senators for relief to avert ‘more painful recession’

Treasury Secretary nominee Janet Yellen will tell senators on Tuesday that Congress must do more to prevent lasting damage to the economy from the coronavirus pandemic, advocating for President-elect Joe Biden’s nearly $2 trillion proposed relief package.

“Without further action, we risk a longer, more painful recession now – and long-term scarring of the economy later,” Yellen says in prepared testimony, obtained by POLITICO.

The high level of federal debt shouldn’t stand in the way of action, says Yellen, who will appear before the Senate Finance Committee at 10 a.m. for her confirmation hearing. The package contains significant sums directed at expanding testing, accelerating vaccine deployment and safely reopening schools. It will also include $1,400-per-person checks to working families, extended unemployment insurance and housing and nutrition aid.

Biden proposed the $1.9 trillion package last Thursday, warning that “we are in the midst of a dark winter of this pandemic.” The proposal sets up one of the first big fights of his presidency, with Senate Majority Leader Mitch McConnell and other Republicans already beginning to raise deficit concerns late last year even though President Donald Trump increased the national debt by trillions of dollars with little resistance.

“Neither the President-elect, nor I, propose this relief package without an appreciation for the country’s debt burden,” says Yellen, a former Federal Reserve chair. “But right now, with interest rates at historic lows, the smartest thing we can do is act big. In the long run, I believe the benefits will far outweigh the costs, especially if we care about helping people who have been struggling for a very long time.”

Yellen will also highlight the need to address the so-called K-shaped nature of the recovery, where a graph of economic growth would show richer Americans’ fortunes brightening while poorer people's wealth craters.

“As Treasury secretary, I think there will be a dual mission,” she will say. “Helping Americans endure the final months of this pandemic; keeping people safe while getting them back to work. That’s our first task. But then there is the longer-term project. We have to rebuild our economy so that it creates more prosperity for more people and ensures that American workers can compete in an increasingly competitive global economy.”