Biden’s Treasury pick plays down debt and tax hikes at hearing

Janet Yellen, chosen by Biden to lead the Treasury Department, brushed off two key Republican senator concerns during her confirmation hearing on Tuesday: the country’s debt and the new administration’s plans to possibly raise taxes.

Driving the news: Yellen – who is expected to win confirmation – said spending big now would save the US from having to dig a deeper hole later. She also said the Biden administration’s current priority is coronavirus relief, not raising taxes.

What she says: Yellen said the country’s debt burden is significant, but concern about it alone shouldn’t prevent Congress from acting big on a relief plan.

  • “The most important thing in my opinion that we can do today to put ourselves on the path to fiscal sustainability is to defeat the pandemic, to provide relief to the American people,” Yellen said in response to a question from Senator John. Thune (RS .D.).
  • “Avoiding doing what we need to do now… would likely put us in a worse financial position in terms of our debt situation.”

Yellen also said the Biden administration “is currently focused not on tax increases, but on programs to help us through the pandemic.”

  • Yes, but: She said tax hikes on corporations and high earners were part of Biden’s policy proposals down the line.

The big picture: Yellen, who testified before the Senate Finance Committee, will play a key role in shaping and carrying out President-elect Joe Biden’s economic agenda as the country grapples with the coronavirus crisis.

  • Sen. Ron Wyden (D-Ore.), the committee’s new chairman, said a vote on confirming Yellen could come as early as Thursday.

Other details …

On China: “We must address China’s abusive, unfair and illegal practices,” Yellen said, while noting that the administration is “ready to use the full range of tools” to combat such behavior.

On climate change: Yellen said she would appoint a senior Treasury official to oversee climate change efforts, noting the need to focus on the risks of climate change to the financial system.

On the US dollar: Yellen said the United States was not “seeking a weaker currency to gain competitive advantage,” noting that she believed in “market-determined exchange rates.” (Rollback: Outgoing Treasury Secretary Steven Mnuchin publicly endorsed a weaker dollar in 2018.)

  • Separately, Yellen said she would consider the prospect of issuing longer-term debt, such as 50-year Treasury bills.

To note: Yellen was not asked about the future of the Fed’s emergency programs — including one aimed at lending to midsize businesses — that the Treasury withdrew from support late last year..

  • Yellen said that the Fed’s so-called Main Street Lending Program “wasn’t very effective” in reaching small businesses.

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