The U.S. labor market is stalling and in a “deep hole” that could take years to escape if lawmakers do not quickly pass an aid package that gives workers a bridge to the end of the pandemic, Treasury Secretary Janet L. Yellen warned on Sunday.
By contrast, passing the $1.9 trillion package that President Biden has proposed could allow the economy to reach full employment by next year, Ms. Yellen said.
She rebutted concerns that big spending would lead to inflation, and said that the economy would be stuck in the kind of long, slow recovery that followed the 2008 financial crisis if lawmakers do too little now.
“The most important risk is that we leave workers and communities scarred by the pandemic and the economic toll that it’s taken,” Ms. Yellen said on the CNN program “State of the Union.” “We have to make sure this doesn’t take a permanent toll on their lives.”
Lawrence H. Summers, a former Treasury secretary under President Bill Clinton, argued in The Washington Post on Thursday that Mr. Biden’s proposal was so big that it might overheat the economy. But Ms. Yellen, a former Federal Reserve chair, said on CNN that she had spent years studying inflation and that she was confident that policymakers had the tools to deal with it if it were to materialize.
Democrats in Congress moved last week to fast-track Mr. Biden’s plan, but the details of the legislation are still being worked out. Ms. Yellen said it was important to ensure that not just low-income workers but also those in the middle class, like teachers and police officers, receive the additional support they need.
“Of course it shouldn’t go to very well-off families that don’t need the funds,” Ms. Yellen said on the CBS program “Face the Nation,” adding that Mr. Biden was discussing with Congress where to set the income ceiling for eligibility.
After a pandemic aid package passes, Ms. Yellen said, Mr. Biden wants to pass a jobs bill built around infrastructure investment, worker training and addressing climate change.
— Alan Rappeport The New York Times