Treasury Secretary Yellen: 'I Think We're in a Good Fiscal Position'

By Susan Jones | May 3, 2021 | 8:41am EDT
Treasury Secretary Janet Yellen is a former Federal Reserve Chair. (Photo by ANDREW CABALLERO-REYNOLDS/AFP via Getty Images)
Treasury Secretary Janet Yellen is a former Federal Reserve Chair. (Photo by ANDREW CABALLERO-REYNOLDS/AFP via Getty Images)

( - President Joe Biden's big-government, big-spending plans should be paid for, because we need "fiscal space" to address emergencies, Treasury Secretary Janet Yellen told NBC's "Meet the Press" on Sunday.

"Well, first of all, we think the plans are extremely important and necessary to invest in our economy," Yellen said.

She noted that Biden wants to raise taxes on corporations and the wealthy to foot the bill.

"He has made clear that he believes that permanent increases in spending should be paid for, and I agree," Yellen said:

I think we're in a good fiscal position. Interest rates are historically low. They've been that way for a long time, and it's likely they'll stay that way into the future. But we do need fiscal space to be able to address emergencies like the one that we've been in with respect to the pandemic. We don't want to use up all of that fiscal space. And over the long run, deficits need to be contained to keep our federal finances on a sustainable basis.

So I believe that we should pay for these historic investments. There will be a big return. I expect productivity to rise and will be great returns from investing in research and development and enabling families to participate with paid leave and child care support in the workforce. So I think it's true that a stronger economy will generate more tax revenues, but I think the safest thing is to pay for them, and we're doing it in a way that's fair.

I should also mention that an important way of paying for this is increasing tax compliance. It's estimated that underpayment of taxes that are really due is costing us, the federal government, about $7 trillion over a decade. And there's an important proposal here to increase compliance to fund the IRS so that -- and this is a matter of fairness -- to increase and collect the tax revenue that's due under our tax code.

Yellen said the trillions of dollars of spending included in the American Jobs Plan and the American Families Plan is "spread out quite evenly over eight to ten years," so it shouldn't accelerate inflation:

"And the Federal Reserve has the tools to address inflation, should it arise. We will monitor that very carefully. We're proposing that the spending be paid for. And I don't believe that inflation will be an issue, but if it becomes an issue, we have tools to address it. These are historic investments that we need to make our economy productive and fair."

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