The United States faces unacceptable levels of inflation and a proper budget stance is needed to help cushion inflationary pressures without undermining the economy, Treasury Secretary Janet Yellen told senators.
In remarks prepared for the Senate Finance Committee, the official added that elements of President Joe Biden’s proposed spending legislation can help lower costs for Americans, including prescription drugs and clean energy initiatives.
“We are currently facing macroeconomic challenges, including unacceptable levels of inflation, as well as complications associated with disruptions to supply chains caused by the impact of the pandemic and the effects of supply-side shocks to oil markets. and food as a result of the war in Ukraine,” Yellen mentioned.
The official has been criticized by the Republicans after admitting her mistake about the trajectory of inflation, since it is at a maximum of 40 years (8.5% per year).
The secretary rejected claims by Republicans that inflation is being fueled by last year’s $1.9 trillion American Rescue Plan (ARP).
We see high inflation in almost every developed country in the world. And they have very different tax policies,” Yellen said. “So it’s not possible that the inflation we’re experiencing reflects the impact of the ARP.”
Yellen said in recent weeks that the Federal Reserve (Fed) is primarily responsible for reducing inflation and that it respects its independence in setting monetary policy.
“To cushion inflationary pressures, without undermining the strength of the labor market, an adequate budget stance is needed to complement the Fed’s monetary policy actions.”
The Biden administration is pushing a scaled-down version of its stalled climate and social spending agenda, which aims to offer tax credits for clean energy technologies and reform prescription drug prices.
Spending is financed by higher taxes on businesses and the wealthiest, closing loopholes and improving tax collection.
Likewise, Yellen said she was “very focused” on moving forward with a global tax reform agreement between 137 countries, which includes a global minimum tax of 15 percent.
“I am hopeful that Congress will also apply this global minimum tax as part of its legislative agenda,” he concluded.