US Treasury Secretary Janet Yellen urged lawmakers to approve additional investments in renewable energy and higher taxes on the wealthy on Tuesday, as she defended the administration’s efforts to blunt the impact of inflation.
“I believe there’s lot that Congress can do to ease the cost burdens that households are experiencing,” Yellen told the Senate Finance Committee in the first of two days of testimony on President Joe Biden’s budget for the 2023 fiscal year.
Besides renewable energy investments — which Yellen said could help address high gasoline prices — the Treasury secretary backed more spending on affordable housing and efforts to rein in pharmaceutical prices.
She also highlighted the Biden administration’s historically large release of oil from the Strategic Petroleum Reserve to ease prices that drivers are facing at the pump, which have skyrocketed since the Russian invasion of Ukraine, hitting new records daily, with the national average at $4.92 a gallon Tuesday.
“Gas prices, while very high … would be higher without that,” Yellen said.
Yellen said the full-year 2022 inflation forecast is “likely to be higher” than the four percent initially projected. The forecast will be updated in the coming weeks, she said.
“Inflation is really an economic problem at this point, and it’s critical that we address it,” Yellen said, adding, “I do expect inflation to remain high, although I very much hope that it will be coming down now.”
The hearings come as Biden contends with a low favorability rating ahead of key midterm elections, with the pain from higher gasoline and food prices outweighing a strong job market and 3.6 percent unemployment.
Yellen was warmly received by Senate Democrats, but Republicans pointed to the administration’s energy and climate policies as a reason for the energy crunch and characterized Biden’s 2021 American Rescue Plan as a main reason for inflation.
“What I heard you say is that it is OK to raise taxes right now and that it is proper to have more stimulus spending to deal with this crisis,” said Senator Mike Crapo, a Republican representing Idaho.
“I just have to say I disagree with you on that.”
Yellen defended the American Rescue Plan, saying the administration took action in response to forecasts that unemployment could top nine percent given the headwinds amid the Covid-19 upheaval.
At the time, she said, “The overwhelming risk was that Americans would be scarred by a deep and long recession.”
Republicans also took Yellen to task for comments early 2021 characterizing inflationary pressures as “transitory,” the same word used early on by Federal Reserve Chair Jerome Powell.
Yellen said her remarks at the time did not foresee the supply chain problems that surfaced later in 2021, or the Russian invasion of Ukraine.
But Senator John Barrasso, Republican of Wyoming, said given Yellen’s past assurances, “it makes me wonder why Americans should put any confidence in your pronouncements and decisions and recommendations today.”
