Janet Yellen, the U.S. Treasury Secretary, said tax increases would be needed to fund the next stages of the Biden administration’s economic agenda, involving about $ 3 trillion in new spending on infrastructure, clean energy, and education.
In testimony before the House Financial Services Committee on Tuesday, Yellen was criticized by Republican lawmakers who objected to raising taxes on businesses and wealthy households to pay for the large-scale expenditures.
The Treasury Secretary defended the need for tax increases but promised the Biden administration would do nothing to “hurt” small businesses or lower- and middle-income Americans.
“We need to generate revenue fairly to support the spending this economy needs to be competitive and productive,” said Yellen in response to questions from Ann Wagner, a Missouri Republican representative.
Yellen adds: “A package that consists of investments in people [and] investment in infrastructure will help create good jobs in the US economy and changes in tax structure will help pay for those programs. “
Specifically, Joe Biden’s economic advisers are looking into pushing for some of the tax increases he proposed during the 2020 campaign against Donald Trump, including an increase in corporate tax from 21 percent to 28 percent, an increase in the top tax. rate for the richest income bracket, and higher capital gains tax rates for millionaires.
The measures would help offset the roughly $ 3 trillion cost of its investment plans. The package would come on top of the $ 1.9 trillion fiscal stimulus, which was fully funded by increasing the budget deficit, Biden set this month to halt the recovery.
Yellen’s appearance before Congress, in virtual form, was her first since she was confirmed as Secretary of the Treasury. She appeared with Jay Powell, the chairman of the Federal Reserve, and both sought to refute concerns that excessive spending could backfire on the US economy.
Yellen said the stimulus could “return” the economy to full employment next year, completing the pandemic recovery. Powell rejected growing concerns that a spending burst this year could lead to unhealthy inflation that would be difficult to control.
“Our best view is that the effect on inflation will not be particularly great and not persistent,” he said.
Powell also reiterated that the Fed would not suddenly move in the direction of tighter policies and was far from beginning to lift its monetary support for the economy by slowing its asset purchases, despite Fed officials’ forecasts for a rise in 6.5 percent of the gross domestic product this year.
“We’ve learned over a number of years that we need to communicate carefully and move forward slowly,” Powell said. “We’ll let people know what’s coming.”
Yellen also defended her attempt to open the door for the IMF to issue another round of $ 650 billion in special drawing rights to give its members access to liquidity as they grapple with pandemic-related financial troubles.
A Republican lawmaker attacked the plan – reversing the Trump administration’s policies – to direct money to strategic enemies such as China, Iran and Venezuela. But Yellen said it was an important tool to prevent low-income countries from “taking shrinking deflationary measures that would make recovery more difficult.”