Finance Committee Chairman Charles E. Grassley (R-Iowa) called the plan a “laundry list of liberal structural economic reforms.”
And Sen. Patrick J. Toomey (R-Pa.) told Yellen: “I look forward to working with you, but I have to admit that the contours of the stimulus bill as proposed by the Biden administration are going to make that difficult.”
Yellen, a longtime economist and former chair of the Federal Reserve, disputed these arguments, insisting that more spending is needed immediately to address the raging pandemic and prop up the economy.
“The most important thing in my view we can do today to put us on a path to fiscal sustainability is to defeat the pandemic; to provide relief to American people; and then make long-term investments that will help the economy grow,” Yellen said.
Failing to spend enough now, Yellen said, “would likely leave us in a worse place fiscally and with respect to our debt situation.”
Yellen, 74, spent years as a professor before entering politics as head of President Bill Clinton’s Council of Economic Advisers in the late 1990s. She chaired the Fed from 2014 to 2018, playing a key role in the recovery from the Great Recession with a studied approach that helped push down the unemployment rate over time. President Trump broke with tradition when he opted not to reappoint her.
She was the first woman to chair the Fed and will become the first female treasury secretary if confirmed by the Senate. She would replace Treasury Secretary Steven Mnuchin.
Yellen’s confirmation is likely, as Democrats will control the Senate once the two new senators from Georgia are seated. That is expected to happen Wednesday afternoon, following Biden’s inauguration.
Sen. Ron Wyden (D-Ore.), who will take over the Finance Committee chairmanship from Grassley, said he hopes Yellen will be confirmed by the full Senate on Thursday.
Biden and Yellen are set to inherit one of the most bleak economic situations in recent memory. The economy has shown troubling signs of deteriorating this winter as the novel coronavirus surges across the country, with the December jobs numbers the worst since last spring.
Yellen’s immediate challenge will be helping to shepherd Biden’s proposed $1.9 trillion relief package through a closely divided Congress. Tuesday’s hearing made clear how difficult that will be, as Toomey argued that “the ink is barely dry” on the last big stimulus bill Congress passed — $900 billion signed by Trump in December.
On top of several other bills approved earlier last year, Congress has already committed about $4 trillion to pandemic relief legislation. In the view of many Republicans that is more than enough, especially in light of the nation’s fast-growing deficit and debt. Yellen repeatedly defended various components of Biden’s plan, including a new round of stimulus checks and the increase in the minimum wage.
“Neither the president-elect, nor I, propose this relief package without an appreciation for the country’s debt burden. But right now, with interest rates at historic lows, the smartest thing we can do is act big,” Yellen said. “In the long run, I believe the benefits will far outweigh the costs, especially if we care about helping people who have been struggling for a very long time.”
Democrats on the committee echoed Yellen’s views.
Wyden said that the Biden administration “is going to begin with all-out triage” and Congress must keep pumping aid into the economy.
“The good news is that Chair Yellen knows that going small on economic relief would be a big mistake,” Wyden said.
Yellen also faced questions from Sen. Mike Crapo (R-Idaho) about the possibility that Biden would raise taxes.
Yellen said the administration would take no such steps while the pandemic is active “and really depressing the economy,” but confirmed that in the future Biden intends to try to repeal parts of the 2017 tax law that helped the highest-income Americans and large corporations.
“It’s very important that corporations and wealthy individuals pay their fair share,” Yellen said.
Yellen also said Biden aims to reverse the GOP tax law’s incentives to offshore manufacturing. She said she would try to address the global decline in corporate tax rates through international negotiations.
“We look forward to actively working with other countries … to try to stop what has been a destructive global race to the bottom on corporate taxation,” Yellen said. “In that context, we would assure the competitiveness of American corporations, even with a somewhat higher corporate tax.”
Grassley pressed Yellen on Democratic lawmakers’ push to repeal the cap on state and local tax deductions, which Republicans implemented as part of their 2017 tax law. Democrats have blasted the measure as eliminating a crucial funding source for state and local governments, and sought unsuccessfully to repeal it last year as part of virus relief legislation.
But even liberal economists have found that repealing the measure would largely benefit the wealthy. Yellen was noncommittal in her response but said she would study the matter further with Treasury Department officials.
“Before making a decision about what should be done going forward, I think it’s critical to study and evaluate what the impact has been on state and local governments and their ability to provide critical services,” Yellen said.
Before the hearing, Yellen had reported in a financial disclosure form that she earned more than $7 million in speaking fees from multiple large corporations, including Goldman Sachs, in the two years since leaving the Fed. She pledged in a filing to the U.S. Office of Government Ethics to seek written authorization from ethics officials to participate in matters involving firms from which she’d received compensation. Senators did not raise the issue during Tuesday’s hearing.