Janet Yellen has denied claims she wanted Joe Biden to scale back the size of his $1.9bn Covid stimulus package last year over fears it could stoke inflation.
The US Treasury secretary issued a statement on Saturday rebutting claims made in a forthcoming book that she initially wanted to trim the bill by a third.
The book threatens to give ammunition to the US president’s critics, who accuse him of having helped unleash the highest inflation in decades with large spending bills in the opening months of his administration.
“I never urged adoption of a smaller American Rescue Plan package, and I believe that ARP played a central role in driving strong growth throughout 2021 and afterwards,” Yellen said.
She issued her statement after excerpts from a new biography of Yellen alleged she initially agreed with Larry Summers, one of her predecessors at the Treasury, that the president’s signature economic measures were going to push up prices.
According to reports, Owen Ullmann states in Empathy Economics: “Privately, Yellen agreed with Summers that too much government money was flowing into the economy too quickly.” His publisher PublicAffairs claimed Ullmann had “unfiltered access” to the Treasury secretary while researching the book.
Inflation has soared for much of 2021 and the early part of 2022. Core inflation was 4.9 per cent in April compared with the previous year, according to the Federal Reserve’s preferred personal consumption expenditures price index. It hit 5.3 per cent the previous month on an annualised basis.
High prices have taken a heavy political toll on Biden, whose approval rating is languishing at about 40 per cent, even as the jobs market continues its steady recovery from the Covid-19 lows.
The president’s critics have accused him of ignoring the warnings of people such as Summers, who said last year the bumper Covid relief and bipartisan infrastructure bills would add fuel to an already overheating economy.
Last week, Yellen said she had been wrong about the likely path inflation would take. “There have been unanticipated and large shocks to the economy that have boosted energy and food prices and supply bottlenecks that have affected our economy badly that I didn’t — at the time — didn’t fully understand, but we recognise that now,” she told CNN.
Meanwhile, Biden has been at pains in recent weeks to show that he considers tackling high prices his number one concern. Last week he wrote in the Wall Street Journal that he realised Americans were “anxious” about high inflation. The president has also given his public backing to Jay Powell, the Fed chair, to do anything he thinks necessary to curb rising costs.
Last month, the Fed raised its benchmark interest rate by half a percentage point for the first time since 2000 and signalled it would do the same at its next two meetings.