Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Yellen says Biden budget to push U.S. debt higher, not inflation

Published 05/27/2021, 11:20 AM
Updated 05/27/2021, 02:30 PM
© Reuters. FILE PHOTO: U.S. Treasury Secretary Janet Yellen speaks as she joins White House Press Secretary Jen Psaki for the daily press briefing at the White House in Washington, U.S. May 7, 2021.  REUTERS/Jonathan Ernst/File Photo

© Reuters. FILE PHOTO: U.S. Treasury Secretary Janet Yellen speaks as she joins White House Press Secretary Jen Psaki for the daily press briefing at the White House in Washington, U.S. May 7, 2021. REUTERS/Jonathan Ernst/File Photo

By David Lawder and Ann Saphir

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen said on Thursday that President Joe Biden's fiscal 2022 budget plan will push U.S. debt above the size of the U.S. economy, but will not contribute to inflationary pressures, which she views as temporary.

Yellen told a U.S. House of Representatives Appropriations subcommittee hearing that the White House and Treasury were closely monitoring inflation but there was still slack in the economy that can absorb increased spending.

"The recent inflation we have seen will be temporary, it's not something that's endemic," Yellen said, responding to numerous questions about inflationary pressures from Republican lawmakers.

She noted that supply bottlenecks and shortages of materials were helping to drive inflation data, along with a rebound from very low measures during the COVID-19 pandemic. "I expect it to last several more months and to see high annual rates of inflation through the end of this year."

She said Biden's fiscal 2022 budget request, to be unveiled on Friday, will increase over the next decade the U.S. federal debt-to-GDP ratio above its current level of about 100% -- a figure pushed higher by pandemic relief spending.

Yellen downplayed the significance of that increase.

The budget plan is expected to include trillions of dollars in spending on infrastructure, childcare and other public works, incorporating Biden's previous spending and tax proposals.

The federal government's ability to pay interest on the debt was a more important measure, she said, adding that the current real interest burden is currently negative because long-term Treasury yields of 1.6% are below an inflation rate of about 2%.

"We'll have a temporary period of spending too and some of these increases, will - beyond the budget window - will result in lower deficits and more tax revenue to support those expenditures. I believe it is a fiscally responsible program," Yellen said.

The investments would increase the economy's supply capacity and allow faster growth in future years without inflation, she added.

IRS INCREASE

© Reuters. FILE PHOTO: U.S. Treasury Secretary Janet Yellen speaks as she joins White House Press Secretary Jen Psaki for the daily press briefing at the White House in Washington, U.S. May 7, 2021.  REUTERS/Jonathan Ernst/File Photo

Among those proposals that she forecasts will increase U.S. revenues is an increase to the Internal Revenue Service budget to crack down on tax evasion by wealthy individuals. She said the Treasury's budget request would include $13.2 billion in discretionary appropriations for the IRS -- an increase of about $1.3 billion from enacted fiscal 2021 levels.

The IRS budget would include an additional $417 million as part of a multi-year program to boost tax enforcement and revamp IRS information technology architecture, as part of Biden's proposed legislation to increase support for American families.

Latest comments

The US has had nearly 20 years of deficit spending and has been unable to raise interest rates without collapsing the economy. Inflation is at massive levels. This is just doublespeak. Inflation is already at massive levels the goal should be reducing spending and inflation...not letting this be "the new norm". Biden is already set to increase the national debt more in his first few months than any other president in U.S. history their entire term.
do you expect me to just believe you?
More spending by biggov means more control by IRS ensuring the masses pay their "fair share." Marxist codespeak.
They have already started sending many billions of extra taxpayer dollars to the IRS for enforcement purposes.
 gifting purposes too, they are wanting to spending money to look at "racial inequity" in tax enforcement, even though race is nowhere on tax forms
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.