Jan 19, 2021 - Economy

Janet Yellen plays down debt, tax hike concerns in confirmation hearing

Janet Yellen speaks during an event to name President-elect Joe Biden’s economic team at the Queen Theater

Treasury Secretary nominee Janet Yellen at an event in December. Photo: Alex Wong via Getty Images

Janet Yellen, Biden's pick to lead the Treasury Department, pushed back against two key concerns from Republican senators at her confirmation hearing on Tuesday: the country's debt and the incoming administration's plans to eventually raise taxes.

Driving the news: Yellen — who's expected to win confirmation — said spending big now will prevent the U.S. from having to dig out of a deeper hole later. She also said the Biden administration's priority right now is coronavirus relief, not raising taxes.

What she's saying: Yellen said the country's debt burden is important, but concern about that alone shouldn't prevent Congress from acting big on a relief package.

  • "The most important thing in my view that we can do today to put us on a path of fiscal sustainability is to defeat the pandemic, to provide relief to American people," Yellen said in response to a question from Sen. John Thune (R-S.D.).
  • "To avoid doing what we need to do now ... would likely leave us in a worse place fiscally with respect to our debt situation."

Yellen also said the Biden administration’s “focus right now is not on tax increases, it’s on programs to help us through the pandemic.”

  • Yes, but: She did say that tax hikes on businesses and high earners were part of Biden 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 deals with the coronavirus crisis.

  • Sen. Ron Wyden (D-Ore.), the incoming chair of the committee, said a vote on Yellen's confirmation could come as soon as Thursday.

Other details ...

On China: "We need to take on China's abusive, unfair and illegal practices," Yellen said, while noting the administration is "prepared to use the full array of tools" to address these behaviors.

On climate change: Yellen said she would appoint a senior-level Treasury official to oversee efforts related to climate change, noting the need for a focus on climate change's risks to the financial system.

On the U.S. dollar: Yellen said the U.S. doesn't "seek a weaker currency to gain competitive advantage," noting that she believes in "market-determined exchange rates." (Flashback: Outgoing Treasury Secretary Steven Mnuchin publicly endorsed a weaker dollar in 2018.)

  • Separately, Yellen said she would examine the prospect of longer-term debt issuance, like 50-year Treasury notes.

Worth noting: Yellen was not asked about the future of the emergency Fed programs — including one aimed at lending to mid-sized businesses — that Treasury yanked support from late last year.

  • Yellen did say that the so-called Main Street Lending Program set up by the Fed "was not very effective" at reaching small businesses.
Go deeper