Yellen Plugs Biden Agenda to Beat Sluggish Long-Term Growth

(Bloomberg) -- Treasury Secretary Janet Yellen touted the benefits of the Biden administration’s social-investment proposals as a means of overcoming what’s projected to be a return to subdued economic growth after the current rapid pandemic recovery.

“Forecasters uniformly agree that growth over the next several decades will be sluggish, limited by slow productivity growth and an aging population that restricts growth in labor supply,” Yellen said in remarks to the Stanford Institute for Economic Policy Research on Friday.

Yellen reiterated her characterization of President Joe Biden’s economic agenda as “modern supply-side economics” -- expanding the productive capacity of the nation through social-support programs that encourage greater labor-force participation.

“A key element of the president’s agenda is to raise worker productivity through a collection of human-capital initiatives that would expand access to early child education, make college more affordable, strengthen worker training, and achieve universal broadband access,” Yellen said.

The administration has ditched calling on Congress to pass the roughly $2 trillion “Build Back Better” social-spending and tax-hike package since moderate Democrat Joe Manchin, whose backing is vital in the 50-50 Senate, withdrew support for it in December.

‘Ambitious’ Expansion

But Biden’s economic team is still plugging for measures including childcare support, an expanded earned income-tax credit and greater education spending, all of which were flagged by Yellen in her remarks Friday. 

“All told, these investments represent one of the most ambitious expansions in training and education in our nation’s history -- an investment program that would revitalize the preparedness of our nation’s workforce,” she said.  

During a question-and-answer session following her remarks, Yellen said that the U.S. debt-to-GDP ratio can be kept on a “sustainable path” by ensuring that investments in the Biden agenda are paid for with tax revenues.

Yellen also expressed confidence that the Federal Reserve -- which she previously ran as chair -- will successfully pull down inflation without causing a recession. 

“They’re going to bring inflation down but in a way that achieves a soft landing,” she said. “This is something that is not unheard of,” she said, echoing comments earlier this week by her successor as Fed chief, Jerome Powell, that history shows examples of the central bank securing price stability without triggering a recession.

©2022 Bloomberg L.P.