Treasury Secretary Janet Yellen assured Congress that the recent jump in inflation is being monitored very carefully by the Biden administration, but said again that any increase will prove temporary.
Testifying about Biden’s US$6-trillion budget proposal before the Senate Finance Committee, Yellen was asked Wednesday by Republican lawmakers about recent sharp gains in inflation, including a 5% rise in consumer prices for the 12 months ending in May, the biggest jump since 2008.
Yellen said no one wants to relive the double-digit inflation of the 1970s and that the administration is taking the recent inflation “very seriously.” But she said she still believes the price gains reflect temporary factors related to re-opening the economy after the prolonged shutdowns due to the global pandemic.
“Most economist think the current burst of inflation we have seen reflects the difficulties of re-opening an economy that has been shut down,” Yellen said, noting huge swings that have occurred in buying patterns and bottle necks that have caused shortages.
Yellen said that when the pandemic hit more than a year ago prices, especially in such service industries as airlines and hotels, collapsed. Now with the country reopening, those prices are returning to more normal levels, she said
“I believe our economy is on track to get back to more normal operations,” which will make the spike in inflation a temporary development, Yellen said. She said that so far expectations about future inflation on the part of consumers and businesses have remained well anchored. That would lessen the threat that some kind of wage-price spiral like the one seen in the 1970s.
Yellen also assured the committee that the Treasury Department, which oversees the Internal Revenue Service, was working to determine how information about the taxes paid by the wealthiest Americans had been obtained by ProPublica.
The non-profit investigative journalism organization reported that the richest Americans paid less in tax — an average of 15.8% of adjusted gross income — than ordinary workers do.
Sen. John Thune, R-South Dakota, called last week’s report “one of the most widespread breaches in history” of government data which would undermine the confidence of Americans in the IRS.
Yellen said she viewed the incident as a very serious situation and said that Treasury had referred the matter to the Justice Department and the Treasury inspector general for tax administration.
“It is absolutely a top priority to safeguard taxpayer data,” Yellen said. “If there are actions that we need to take to shore up the protection of this information, you have […] my word we will do so.”
In her testimony on Biden’s budget, Yellen said the administration was seeking to overcome decades of harmful economic trends which have contributed to widening income inequality.
“These destructive forces — the divergence in wages and of geographic regions, the decline in labor force participation, the rise of climate change and the persistence of racial inequality — all these are combining to block tens of millions of Americans from the prosperous parts of our economy,” Yellen said.