Yellen Opens Debate on Giant Spending, Saying the ‘World Has Changed’

Janet Yellen invoked an enduring era of low interest rates in delivering the Biden administration’s opening argument to lawmakers for its $1.9 trillion Covid-19 relief proposal.

President-elect Joe Biden’s pick for Treasury secretary told the Senate Finance Committee in testimony Tuesday that the slew of spending -- from aid to small businesses and the unemployed to funding for state governments -- was needed to fight the pandemic, while playing down concerns about the debt it creates.

“The world has changed,” Yellen, a former Federal Reserve chair, said with regard to interest rates. “In a very low interest-rate environment like we’re in, what we’re seeing is that even though the amount of debt relative to the economy has gone up, the interest burden hasn’t.”

In pushing the relief proposal, and a follow-up package to be unveiled next month, Biden is hoping to avoid a repeat of the economy’s slow-motion rebound from the financial crisis a dozen years ago. Back then, when he was vice president, premature budget tightening delayed for years a full recovery in the job market.

“The most important thing we can do is to defeat the pandemic, to provide relief to American people and to make long-term investments that make the economy grow and benefit future generations,” said Yellen, who could be confirmed as soon as Thursday according to a timeline presented by the incoming Senate Finance chairman. Failure to address the crisis now “would likely leave us in a worse place fiscally,” she said.

Her argument made no immediate headway with Republicans on the panel. While Democrats are set to control the Senate after Wednesday afternoon, support from GOP senators would be needed to speed the stimulus bill forward.