White House spending plans won’t fuel inflation: Yellen

White House spending plans won’t fuel inflation: Yellen

White House spending plans won’t fuel inflation: Yellen

US Treasury Secretary Janet Yellen. Photo: File

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WASHINGTON: The infrastructure and social services spending plans the White House is pushing Congress to enact, will not fuel inflation in the United States, Treasury Secretary Janet Yellen said on Friday.

The proposals to spend $1.2 trillion on infrastructure upgrades and $1.75 trillion on education, health and child and clean energy are centerpieces of President Joe Biden’s agenda, but come as the world’s largest economy grapples with surging prices.

The plans await enactment in a Congress narrowly controlled by Democrats who remain divided over how to pay for the Build Back Better social services proposal and what to include in it, with some members worrying it could push inflation higher.

“I don’t think that these investments will drive up inflation,” Yellen said in an interview with CNBC from Rome, where G20 leaders are gathering.

She said that the cost of the plans would be fully offset by higher levies on the wealthy and corporations as well as better tax enforcement, and argued they will help families by lowering costs for health and child care.

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“The infrastructure and Build Back Better packages are spending that’s really small relative to the economy in any year and spread over 10 years. And, as I said, it will boost the economy’s potential to grow,” she said.

Prices have increased across the United States this year as the economy bounces back from the Covid-19 downturn, aided by vaccines against the virus.

Inflation as measured by the Commerce Department rose 4.4 per cent in September compared to the same month in 2020, its biggest jump since January 1991.

Strong demand, shortages of workers, rising global energy prices and supply chain snarls that have disrupted production have been blamed for fuelling the increase.

Opposition Republicans argue Biden’s $1.9 trillion pandemic rescue package enacted in March also played a role, and the Build Back Better plan would make it worse.

“I believe that price increases will normalise and we’ll see lower monthly inflation rates I think by the second half of the year,” Yellen said Friday in a separate interview with CNN, predicting annual inflation closer to 2 per cent.

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