Tag Archives: janet yellen

US

Door of No Return: Yellen visits onetime slave-trading post

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GOREE ISLAND, Senegal (AP) — U.S. Treasury Secretary Janet Yellen paid a solemn visit Saturday to the salmon-colored house on an island off Senegal that is one of the most recognized symbols of the horrors of the Atlantic slave trade that trapped tens of millions of Africans in bondage for generations.

Yellen, in Senegal as part of a 10-day trip aimed at rebuilding economic relationships between the U.S. and Africa, stood in the Gorée Island building known as the House of Slaves and peered out of the “Door of No Return,” from which enslaved people were shipped across the Atlantic.

She was guided on a tour through various corridors and tight quarters in the house, shaking her head in disgust at what she was told about the economics of how slaves were valued.

“Gorée and the trans-Atlantic slave trade are not just a part of African history. They are a part of American history as well,” Yellen said later in brief remarks during her visit.

“We know that the tragedy did not stop with the generation of humans taken from here,” she added. “Even after slavery was abolished, Black Americans — many of whom can trace their descendance through ports like this across Africa — were denied the rights and freedoms promised to them under our Constitution.”

Later, in an interview with The Associated Press, Yellen said that while promoting diversity and racial equality is a key goal, “the administration has not embraced reparations as part of the answer.”

The economic benefits that major slave-trading nations, including the United States, reaped for hundreds of years on the backs of unpaid labor could amount to tens of trillions of dollars, according to research on the commerce.

And in the U.S., African slaves and their children contributed to the building of the nation’s most storied institutions, including the White House and Capitol, according to the White House Historical Association.

Yellen acknowledged the ongoing ramifications of that brutal past in her public remarks.

“In both Africa and the United States, even as we have made tremendous strides, we are still living with the brutal consequences of the trans-Atlantic slave trade,” she said.

In a guest book at the house, she wrote that it served as “an important reminder that the histories of Africa and America are intimately connected. While I am pained by its past, I am also heartened by the vibrant community I have seen here. I take from this place the importance of redoubling our commitment to fight for our shared principles and values of freedom and human rights wherever they are threatened — in Africa, in the United States, and around the world.”

Yellen’s trip to the island is one that many dignitaries have made, including former Presidents Barack Obama and Bill Clinton and South Africa’s Nelson Mandela. Today, Gorée Island is designated as a UNESCO World Heritage Site.

Yellen’s stop there during a trip meant to revitalize U.S.-African economic relations is one that evoked the massive costs of the slave trade. There has been a resurgence in interest in determining the true cost of slavery on the generations impacted.

The House Financial Services Committee in recent years has studied how U.S. banks and insurance companies profited from the practice of slavery before it was outlawed in 1865. There have also been hearings on the study and development of reparations proposals in the United States.

In the AP interview, Yellen said the administration was “working in many ways in communities of color and low-income communities to try to bring more capital to advance lending and other things,” she said. “It’s a critically important goal.”

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US

Yellen warns of ‘global financial crisis’ if US debt limit agreement isn’t reached

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CNN
 — 

Treasury Secretary Janet Yellen on Friday warned of the widespread global effects that could be felt if the federal government exhausts extraordinary measures and fails to raise the debt ceiling, telling CNN’s Christiane Amanpour about the ways everyday Americans could face stark consequences.

Yellen’s warning comes after the United States on Thursday hit its $31.4 trillion debt limit set by Congress, forcing the Treasury Department to start taking extraordinary measures to keep the government paying its bills.

While those newly deployed extraordinary measures are largely behind-the-scenes accounting maneuvers, Yellen told Amanpour that “the actual date at which we would no longer be able to use these measures is quite uncertain, but it could conceivably come as early as early June.”

Speaking exclusively to CNN from Senegal, Yellen said that after the measures are exhausted, the US could experience at a minimum downgrading of its debt as a result of Congress failing to raise the debt ceiling. The effects of the federal government failing to make payments, she argued, could be as broad as a “global financial crisis.”

“If that happened, our borrowing costs would increase and every American would see that their borrowing costs would increase as well,” Yellen said. “On top of that, a failure to make payments that are due, whether it’s the bondholders or to Social Security recipients or to our military, would undoubtedly cause a recession in the US economy and could cause a global financial crisis.”

“It would certainly undermine the role of the dollar as a reserve currency that is used in transactions all over the world. And Americans – many people would lose their jobs and certainly their borrowing costs would rise,” she continued.

Yellen wrote a letter to House Speaker Kevin McCarthy on Thursday explaining the measures being taken, escalating pressure on Capitol Hill to avoid a catastrophic default.

Hardline Republicans have demanded that lifting the borrowing cap be tied to spending reductions. The White House has countered by saying that it will not offer any concessions or negotiate on raising the debt ceiling. And so far, Yellen’s warnings have failed to spark bipartisan discussion, with both Republicans and Democrats reaffirming their rigid positions over the past week.

As part of the debt issuance suspension period using extraordinary measures, the agency intends to sell existing investments and suspend reinvestments of the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. Also, it will suspend the reinvestment of a government securities fund of the Federal Employees Retirement System Thrift Savings Plan.

No federal retirees or employees will be affected, and the funds will be made whole once the impasse ends, Yellen said in the letter.

“I respectfully urge Congress to act promptly to protect the full faith and credit of the United States,” she wrote.

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US

Debt ceiling: Here’s what you should know as threat of default looms

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CNN
 — 

The clock is now ticking to prevent a financial crisis.

The US hit its debt ceiling Thursday, triggering the Treasury Department to start taking extraordinary measures to prevent a default.

While Treasury Secretary Janet Yellen doesn’t expect the US to default on its debt before early June, Congress has to get serious about negotiating a solution, which is not expected to be easy.

Here’s what the situation is all about.

Established by Congress, the debt ceiling is the maximum amount the federal government is able to borrow to finance obligations that lawmakers and presidents have already approved – since the government runs budget deficits and the revenue it collects is not sufficient. Increasing the cap does not authorize new spending commitments.

The debt ceiling, which currently stands at $31.4 trillion, was created more than a century ago and has been modified more than 100 times since World War II.

Though it was originally designed to make it easier for the federal government to borrow, the limit has become a way for Congress to restrict the growth of borrowing – turning it into a political football in recent decades.

Still, fears of a default have prompted lawmakers to pass legislation to raise or suspend the ceiling every time, most recently in December 2021.

It is unlikely that the government will exhaust its cash and the extraordinary measures before early June, though there is “considerable uncertainty” around that forecast, Yellen wrote in a letter to House Speaker Kevin McCarthy last week. It depends in part on how much 2022 tax revenue the government collects this spring.

If the government is no longer able to borrow, it would not have enough money to pay all its bills in full and on time – including interest on the national debt. So it would likely have to temporarily delay payments or default on some of its commitments, potentially affecting Social Security payments, veterans’ benefits and federal employees’ salaries, among others.

But no one knows exactly how Treasury would handle the situation since it has never happened.

A default would also wreak havoc on the US economy and the global financial markets, as well as raise borrowing costs. Even the threat of one in 2011 caused the only credit rating downgrade in the nation’s history.

These moves are mainly behind-the-scenes accounting maneuvers. Treasury secretaries are authorized by Congress to take several types of extraordinary measures to prevent a default, giving lawmakers more time to increase or suspend the limit. Secretaries in both Democratic and Republican administrations have taken such steps.

This time, Yellen anticipates selling existing investments and suspending reinvestments of the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. Also, she is suspending the reinvestment of a government securities fund of the Federal Employees Retirement System Thrift Savings Plan.

These funds are invested in special-issue Treasury securities, which count against the debt limit. Yellen’s actions would reduce the amount of outstanding debt subject to the limit and temporarily provide the agency with additional capacity to continue financing the federal government’s operations.

No retirees will be affected, and the funds will be made whole once the impasse ends.

Recent contention in the House speaker election has raised concerns about whether McCarthy will be able to corral Republican hardliners – who see a potential default as a way to force the government to cut back spending – and negotiate a deal with Democrats, who oppose any reductions.
McCarthy said on Fox on Sunday that now is a good time to “look at the places that we can change our behavior” because “what we’re going to do is bankrupt this country.”

But the White House last week said that it would not offer any concessions or negotiate on raising the debt ceiling.

Meanwhile, House Republicans are preparing contingency plans that would tell the Treasury Department which payments to prioritize if lawmakers can’t agree to address the debt ceiling.

While the two are often confused, a government shutdown happens when Congress doesn’t pass a federal funding bill, while a debt ceiling crisis would occur if lawmakers don’t approve legislation to lift the debt limit.

Congress passed a $1.7 trillion federal spending bill last month, avoiding a government shutdown that could have caused nonessential operations to cease and could have left many federal employees without pay. The legislation will fund government operations until the end of the fiscal year on September 30.

This story and headline have been updated with additional developments.

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World

US, Chinese officials discuss climate, economy, relationship

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ZURICH (AP) — U.S. Treasury Secretary Janet Yellen met on Wednesday with her Chinese counterpart and pledged an effort to manage differences and “prevent competition from becoming anything ever near conflict” as the two nations try to thaw relations.

Yellen’s first face-to-face meeting with Vice Premier Liu He in Zurich is the highest-ranking contact between the two countries since their presidents agreed last November during their first in-person meeting to look for areas of potential cooperation.

Liu said he was ready to work together to seek common ground between China and the U.S. “No matter how circumstances change, we should always maintain dialogue and exchanges,” he said.

A U.S. Treasury readout of their meeting says the two agreed that the U.S. and China would cooperate more on issues around financing for battling climate change and would work to support “developing countries in their clean energy transitions.” The readout also indicates that Yellen plans to travel to China and welcomes her counterparts to the U.S. in the near future.

The meeting comes as the U.S. and Chinese economies grapple with differing but intertwined challenges on trade, technology and more.

Yellen, in opening remarks in front of reporters, told Liu: “While we have areas of disagreement, and we will convey them directly, we should not allow misunderstandings, particularly those stemming from a lack of communication, to unnecessarily worsen our bilateral economic and financial relationship.”

Liu said that China and the U.S. need to communicate and coordinate earnestly, Chinese broadcaster Phoenix TV reported. He said both sides must look at the bigger picture, try to manage disputes properly and work together to maintain stability in relations, the broadcaster said in an online report.

Yellen said the two countries “have a responsibility to manage our differences and prevent competition from becoming anything even near conflict.”

Both economies have their challenges.

The Chinese economy is reopening after a COVID-19 resurgence killed tens of thousands of people and shuttered countless businesses. The U.S. is slowly recovering from 40-year-high inflation and is on track to hit its statutory debt ceiling, setting up an expected political showdown between congressional Democrats and Republicans. The debt issue is of keen interest to Asia, as China is the second-largest holder of U.S. debt.

There is also the Russian invasion of Ukraine, which hinders global economic growth — and has prompted the U.S. and its allies to agree on an oil price cap on Russia in retaliation, putting China in a difficult spot as a friend and economic ally of Russia.

And high interest rates globally have increased pressure on debt-burdened nations that owe great sums to China.

“A wrong policy move or a reversal in the positive data and we could see the global economy head into a recession in 2023,” said Josh Lipsky, senior director of the Atlantic Council’s GeoEconomics Center. “Both countries have a shared interest in avoiding that scenario.”

The World Bank reported last week that the global economy will come “perilously close” to a recession this year, led by weaker growth in all the world’s top economies — including the U.S. and China. Low-income countries are expected to suffer from any economic downturns of superpowers, the report said.

“High on the list is debt restructuring,” Lipsky said of Wednesday’s talks. Several low-income countries are at risk of debt default in 2023 and many of them owe large sums to China.

“Leaders have been trying for two years to get some agreement and avoid a wave of defaults but there’s been little success and one reason is China’s hesitancy. I expect Yellen to press Liu He on this in the meeting,” Lipsky said.

Liu laid out an optimistic vision for the world’s second-largest economy in an address Tuesday at the World Economic Forum in Davos, Switzerland.

“If we work hard enough, we are confident that in 2023, China’s growth will most likely return to its normal trend. The Chinese economy will see a significant improvement,” he said.

After her stop in Switzerland, Yellen will travel to Zambia, Senegal and South Africa this week in what will be the first in a string of visits by Biden administration officials to sub-Saharan Africa during the year.

Zambia is renegotiating its nearly $6 billion debt with China, its biggest creditor. During a closed-door meeting at the Africa Leaders Summit in Washington in December, Yellen and Zambian President Hakainde Hichilema discussed “the need to address debt sustainability and the imperative to conclude a debt treatment for Zambia,” according to Yellen.

The Zurich talks are a follow-up to the November meeting between President Joe Biden and China’s Xi Jinping on the sidelines of the Group of 20 summit in Bali, Indonesia. The two world leaders agreed to empower key senior officials to work on areas of potential cooperation, including tackling climate change and maintaining global financial, health and food stability. Beijing had cut off such contacts with the U.S. in protest of then-House Speaker Nancy Pelosi’s trip to Taiwan in August.

“We’re going to compete vigorously. But I’m not looking for conflict,” Biden said at the time.

U.S. Secretary of State Antony Blinken will be traveling to China in early February.

Among economic sticking points, the Biden administration blocked the sale of advanced computer chips to China and is considering a ban on investment in some Chinese tech companies, possibly undermining a key economic goal that Xi set for his country. Statements by the Democratic president that the U.S. would defend Taiwan against a Chinese invasion also have increased tensions.

And while the U.S. Congress is divided on many issues, members of the House agreed last week to further scrutinize Chinese investments.

New House Speaker Kevin McCarthy, R-Calif., has identified the Communist Party of China as one of two “long-term challenges” for the House, along with the national debt.

“There is bipartisan consensus that the era of trusting Communist China is over,” McCarthy said from the House floor last week when the House voted 365 to 65 — with 146 Democrats joining Republicans — to establish the House Select Committee on China.

Last year, the U.S. Commerce Department added dozens of Chinese high-tech companies, including makers of aviation equipment, chemicals and computer chips, to an export controls blacklist, citing concerns over national security, U.S. interests and human rights. That move prompted the Chinese to file a lawsuit with the World Trade Organization.

Yellen has been critical of China’s trade practices and its relationship with Russia, as the two countries have deepened their economic ties since the start of the war in Ukraine last February. On a July call with Liu, Yellen talked “frankly” about the impact of the Russia’s invasion of Ukraine on the global economy and “unfair, non-market” economic practices, according to a U.S. recap of the call.

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Business

Treasury Secretary Yellen predicts major inflation cooldown in 2023

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New York
CNN
 — 

Treasury Secretary Janet Yellen is striking a cautiously optimistic tone about 2023, predicting a major inflation cooldown and stressing that a recession isn’t required to get prices back under control.

“I believe by the end of next year you will see much lower inflation, if there’s not an unanticipated shock,” Yellen told CBS’s “60 Minutes” in an interview that aired on Sunday.

Yellen cited plunging gas prices — AAA said Monday the national average is down by 52 cents per gallon in the past month — tumbling shipping costs and shortening delivery lags.

“I hope that it will be short-lived,” Yellen said of the current period of high inflation. “We learned a lot of lessons from the high inflation we experienced in the 1970s. And we’re all aware that it’s critically important that inflation be brought under control and not become endemic to our economy. And we’re making sure that won’t happen.”

Yellen, like many economists and even the Federal Reserve, has previously been overly optimistic about inflation. She admitted earlier this year that she was “wrong” about the path of inflation, telling CNN’s Wolf Blitzer in June that she “didn’t — at the time — fully understand” the “large shocks to the economy” that would come from Russia’s war in Ukraine.

The comments come after Friday’s hotter-than-expected wholesale inflation report, which showed producer prices increased in November at the slowest annual pace in 18 months.

The more closely watched consumer inflation report due out on Tuesday this week is expected to show a similar cooldown of consumer prices.

The Federal Reserve is widely expected to deliver a seventh-straight interest rate hike on Wednesday, though investors are betting the US central bank will slow the pace of rate increases from three-quarters of a point to half a point. The Fed’s aggressive rate hikes have driven up borrowing costs — credit card rates are at record highs — and raised fears of a recession.

Yellen conceded a recession is possible in the months ahead — though the former Fed chair emphasized that one isn’t required to tame inflation.

“There’s a risk of a recession,” Yellen said. “But it certainly isn’t, in my view, something that is necessary to bring inflation down.”

Like other Biden administration officials, Yellen argued the economy is in the midst of a healthy transition from blockbuster growth to something more sustainable.

“We had a very rapid recovery from the pandemic. Economic growth was very high,” Yellen said. “To bring inflation down and because almost anyone who wants a job has a job, growth has to slow.”

Yellen said the US economy is at or near full employment, meaning it’s “not necessary” for rapid growth to get people back to work.

The Treasury secretary said she tries to instill a sense of compassion and urgency into policymaking by stressing to her staff that real people are suffering.

Yellen recalled how in 2009 when millions of people were out of work in the middle of the Great Recession, she reminded her staff at the San Francisco Federal Reserve, where she was president from 2004-2010, that there are real people behind labor market statistics and economists need to worry about their wellbeing.

“I think I said, ‘They’re f***people,’” Yellen said. “I wanted people that worked for me to take seriously the harm and misery that was being experienced by all too many Americans.”

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Business

Yellen, Malerba become 1st female pair to sign US currency

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FORT WORTH, Texas (AP) — Treasury Secretary Janet Yellen on Thursday helped mark a milestone in U.S. history when she held up a newly minted $5 bill signed for the first time ever by two women.

Yellen’s signature will appear alongside that of U.S. Treasurer Lynn Malerba, the first Native American in that position.

Yellen joked during a stop in Texas about the bad handwriting of some of her male predecessors and said, “I will admit, I spent some quality time practicing my signature.”

“Two women on the currency for the first time is truly momentous,” added Malerba, who traveled with Yellen to a Bureau of Engraving and Printing facility in Fort Worth to provide their signatures.

They ceremonially signed fresh sheets of bills in $1 and $5 denominations and posed with samples to mark the history-making moment. The new notes will go into circulation next year.

Yellen made her reputation as a stoic chair of the Federal Reserve and a shrewd forecaster, and now is at the forefront of far-flung efforts to use economic levers to help stop Russia’s war in Ukraine, employ tax policy to protect the planet from climate change and oversee a massive effort to strengthen the beleaguered IRS.

That puts her at the center of domestic and global politics, inviting new levels of pressure and second-guessing by friends and foes. She is tackling this challenge as the United States is suffering from inflation that hit a 40-year high this summer and sowed fears of a coming recession.

Even as Yellen watched the fresh bills carrying her signature roll out at the Bureau of Engraving and Printing’s Western currency facility, her remarks focused on Biden administration policy accomplishments rather than her status as the first woman to serve as treasury secretary.

On the Ukraine conflict instigated last February by Russian President Vladimir Putin, she said, ”Together with over 30 countries, we have denied Russia revenue and resources it needs to fight its war.”

As for the domestic economy, she said, pandemic relief and a new law to boost production of semiconductors have positioned the U.S. “to capitalize on a wave of economic opportunities for the American people, including in communities often overlooked.”

Later, talking to reporters, Yellen said she thinks the U.S. can avoid a recession.

“Obviously, there are risks that the economy faces, but I think we’re not in a wage price spiral. Supply chain bottlenecks. are clearly beginning to ease. That’s helpful,” she said. “I believe we’re on the right track in terms of lowering inflation, and a recession is not inevitable.”

Now, two years into Joe Biden’s presidency, Yellen has put to rest rumors she might be ready to leave the administration early and is strapping in for more economic — as well as political — battles ahead.

Along with managing Treasury’s role in the Ukraine war, she faces the Herculean task of revitalizing an IRS that is getting a $80 billion funding boost, and enforcing an anti-money laundering effort that requires documenting the beneficial owners of tens of millions of U.S. businesses in hopes of crushing corruption around the world.

She occupies an increasingly politicized role in which Congress and foreign governments matter as much as the financial markets.

Her Treasury Department is seeking to hobble the Russian economy with an oil price cap, as House Republican leader Kevin McCarthy of California is questioning the level of U.S. support for Ukraine. The Treasury is also putting together tens of billions in tax incentives, to address climate change, that have rankled some European allies and proved controversial with Republicans. And the wage gains in the most recent U.S. jobs report suggest the economy might have to endure more pain than expected to bring inflation back to the Fed’s target of 2% annually.

Along the way, Yellen has not shied away from controversy or speaking her mind on issues that many Americans look at solely through a cultural lens.

When Sen. Tim Scott, R-S.C., at a May congressional hearing told Yellen she was “harsh” for speaking about the positive economic impacts of abortion access for women, she replied, “This is not harsh, this is the truth.” She also has challenged the view that havens for hidden cash lie outside the U.S., instead arguing that the U.S. has become the “best place” to hide illicitly obtained money.

Yellen generated some tension with the White House this year when she veered somewhat from Biden’s insistence that his $1.9 trillion in coronavirus aid package did not contribute to inflation. Republican lawmakers have drawn on analyses by major economists such as Harvard University’s Larry Summers to say that the sum was excessive and sparked inflation. Breakages in the global supply chain and a jump in food and energy costs after Russia invaded Ukraine also have contributed to boosting prices to uncomfortable levels, putting the economy at heightened risk of a recession.

Yellen acknowledged on CNN in May that she had been “wrong then about the path that inflation would take.” Biden said he had been apprised of the possible risks of inflation when putting together the relief package, but he told The Associated Press in an interview that “the idea that it caused inflation is bizarre.”

Yellen’s predictions at the Treasury about financial markets on other points have been proved accurate.

Her warnings about the risks of a deregulated cryptocurrency market foresaw the recent chaos. Crypto markets have seen at least two major crashes, dozens of scams, Ponzi schemes and hundreds of billions of dollars made and evaporated overnight.

Yellen has also used her platform as a top government official to warn that despite women’s advancements in the workplace, a glass ceiling prevents many from advancing to the very top positions.

Yellen, the only person ever to lead the Treasury Department, the Federal Reserve and White House Council of Economic Advisers, still gets flak from members of both political parties for not being more dynamic and politically savvy at times and for being too direct at other times.

Summers, treasury secretary under President Bill Clinton, said in a statement to The Associated Press that Yellen “continues a remarkable career in economic policy at the US Treasury Department. No other Treasury Secretary has had a deeper commitment to social justice as a central goal of macro and financial policies.”

The praise comes as Summers has leveled criticism at the Biden administration for the size of its coronavirus relief, saying its excesses flooded the economy with money and pushed up prices. He has argued that the Fed must continue to raise rates to reduce inflation, an action that could push the U.S. and other nations into recession.

Anusha Chari, an economist who chairs the American Economic Association’s Committee on the Status of Women in the Economics Profession, calls Yellen’s signature on U.S. currency “a huge milestone, but it also shows us how far we have to go.”

The Treasury Department was created in 1789, and until Yellen only white men had led it.

___

Boak reported from Washington. Associated Press writer Darlene Superville in Washington contributed to this report.

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Business

Janet Yellen: Treasury secretary says she’s not seeing signs of a recession in the US economy

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CNN
 — 

Treasury Secretary Janet Yellen said Thursday in an exclusive interview with CNN that she did not see signs of a recession in the near term as the US economy rebounded from six months of contraction.

During a one-on-one interview in Ohio that aired on CNN’s “Erin Burnett OutFront,” Yellen said the third quarter GDP data released Thursday underscored the strength of the US economy as policy makers urgently move to cool off pervasive and soaring inflation that has had a sharp effect on American views of the economy – and endangered the Democratic majorities on Capitol Hill less than two weeks from the midterm elections.

“Look, what we’re seeing right now is solid growth this quarter. Growth has obviously slowed following a very rapid recovery from high unemployment,” Yellen said when asked about whether the latest GDP data assuaged any recession concerns. “We’re at a full employment economy. It’s very natural that growth would slow. And it has over the first three quarters of this year, but it continues to be OK. We have a very strong labor market. I don’t see signs of a recession in this economy at this point.”

Yellen’s optimism comes amid growing concern from economists and finance officials that a recession is likely at some point in the next year, but was based in part on elements of the latest data that showed signs a necessary slowdown in key areas of the economy leaves open a pathway to a “soft landing” as the Federal Reserve prepares to continue its rapid pace of rate increases.

Gross domestic product — the broadest measure of economic activity — rose by an annualized rate of 2.6% during the third quarter, according to initial estimates released Thursday by the Bureau of Economic Analysis. That’s a turnaround from a decline of 1.6% in the first quarter of the year and negative 0.6% in the second.

But Yellen’s view also underscored the complex balancing act President Joe Biden and his top economic officials have attempted over the course of this year, as they seek to highlight a rapid economic recovery and major legislative victories while also pledging to tackle soaring prices.

“Inflation is very high – it’s unacceptably high and Americans feel that every day,” Yellen said when asked how the administration squared its view of the US economy with soaring discontent among voters. Yellen acknowledged that the prices would take time to recede, saying the efforts to bring it back down to levels “that people are more accustomed to” will likely cover “the next couple of years.”

It’s a reality that has undercut efforts by the administrationto take advantage of what officials view as a robust record. Biden, asked about the economy last week, told reporters it’s “strong as hell,” drawing criticism from Republicans.

But Yellen agreed with the President’s assessment that the economy remains strong, standing out in comparison to how other economies around the world are fairing.

“If you look around the world, there are a lot of economies that are really suffering not only from high inflation but very weak economic performance, and the United States stands out. We have unemployment at a 50-year low. … We saw in this morning’s report – consumer spending and investment spending continued to grow. We have solid household finances, business finances, banks that are well capitalized,” she said.

She added, “This is not an economy that’s in recession and we continue to do well.”

Yellen also acknowledged frustration inside the administration that the efforts to pull the US economy out of crisis haven’t received the credit officials believe is merited.

“There were several problems that we could have had, and difficulties many families American families could have faced,” Yellen said. “These are problems we don’t have, because of what the Biden administration has done. So, often one doesn’t get credit for problems that don’t exist.”

Yellen traveled to Cleveland as part of an administration push to highlight the major legislative wins – and the tens of billions of dollars in private sector investment those policies have driven toward manufacturing around the country.

It’s a critical piece of an economic strategy designed to address many of the vulnerabilities and failings laid bare as Covid-19 ravaged the world, with significant federal investments in infrastructure and shoring up – or creating from scratch – key pieces of critical supply chains.

Listing off a series of major private sector investments, including the $20 billion Intel plant opened a few hours drive outside of Columbus, Yellen said they were “real tangible investments happening now,” even as she acknowledged they would take time to full take effect.

Yellen pledged that those efforts would be felt as they course through the economy in the months and years ahead. Asked if the administration’s general message to Americans was one of patience, Yellen said: “Yes.”

“But you’re beginning to see repaired bridges come online – not in every community, but pretty soon. Many communities are going to see roads improved, bridges repaired that have been falling apart. We’re seeing money flow into research and development, which is really an important source of long term strength to the American economy. And America’s strength is going to increase and we’re going to become a more competitive economy,” she said.

Yellen also addressed the battle lines that have been drawn this week over raising the debt ceiling, a now-perpetual Washington crisis of its own making that House Republicans have once again pledged to utilize for leverage should they take the majority.

“The President and I agree that America should not be held hostage by members of Congress who think it’s alright to compromise the credit rating of the United States and to threaten default on US Treasuries, which are the bedrock of global financial markets,” Yellen said.

But Yellen, who has long highlighted the “destructive” nature of the showdowns, has also backed doing away with the debt limit altogether through legislation. A group of House Democrats wrote to Democratic leaders to request that action in the lame duck session of Congress, but Biden rejected the idea this week.

Asked about the split, Yellen said only that she and Biden agreed that it’s “really up to Congress to raise the debt ceiling.”

“It’s utterly essential that it be done, and I’d like to see it occur in the way that it can occur,” Yellen added.

As the administration moves toward a time period that traditionally leads top officials to leave an administration, she made clear she did not plan to be one of them. Asked about reports she had informed the White House she wanted to stay into next year, Yellen said it was “an accurate read.”

“I feel very excited by the program that we talked about,” Yellen said. “And I see in it great strengthening of economic growth and addressing climate change and strengthening American households. And I want to be part of that.”

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US

Expanded IRS free-file system one step closer in Dems’ bill

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WASHINGTON (AP) — The flagship climate change and health care bill passed by Democrats and soon to be signed by President Joe Biden will bring U.S. taxpayers one step closer to a government-operated electronic free-file tax return system.

It’s something lawmakers and advocates have been seeking for years. For many Americans, it’s frustrating that beyond having to pay sometimes hefty tax bills, they also have to shell out additional money for tax preparation programs or preparers because of an increasingly complex U.S. tax system.

“It’s definitely something we should do, and when the IRS is adequately resourced, it’s something that will happen,” said Treasury Secretary Janet Yellen at a June Senate Finance Committee hearing.

And now that the IRS is set to receive nearly $80 billion through the so-called “Inflation Reduction Act,” the agency has the means to develop new systems to help Americans pay their taxes. The legislation passed Congress on Friday.

Several hurdles stand in the way. Even in a best-case scenario, it will likely take years to get a new, free system up and running. There’s also pushback from commercial tax preparation companies, which question whether Americans want the IRS to prepare their taxes.

Perhaps this biggest hurdle is an agreement between the IRS and some commercial tax preparation companies, known as the Free File Alliance, which prevents the federal agency from creating its own free tax return filing system. In short, the IRS agreed not create its own filing system if companies would instead provide free services to taxpayers making $73,000 or less.

This program, though, has been marred with controversy, with commercial firms misrepresenting their services and low taxpayer participation rates.

The Government Accountability Office in April reported that while 70% of taxpayers were eligible for services through the Free File Alliance, only 3% of taxpayers actually use the service. The watchdog recommended the IRS find new free filing options before the Alliance expires in October 2023.

With the funding in the bill, the IRS has an opportunity to create a new system.

Included is a provision that allots $15 million to the IRS to make plans for a free direct e-file tax return system. Those plans would have to be developed within nine months and would include cost estimates for creating and administering a system. They would also require public input.

There are also legislative attempts to move this effort along.

Sen. Elizabeth Warren, D-Mass., in July resubmitted a bill called the Tax Filing Simplification Act that would require the IRS to create its own free online tax filing service and move away from its partnership with private online tax preparation companies.

“I’ve been pushing for a free tax filing system for years, and now the IRS is on the verge of having significant funding to modernize its IT systems, which means it’s time to develop simplified filing tools laid out in my Tax Filing Simplification Act,” Warren told The Associated Press.

“Americans spend too much time and money to file their taxes, and the IRS should adopt these proposals to help millions of Americans file taxes and claim refunds.”

At her Finance Committee appearance, Yellen called for a new system.

“There’s no reason in the world that a modern economy shouldn’t have a system that makes it easy for such a large group of taxpayers to file their returns,” she said.

Vanessa Williamson, a senior fellow at the Urban-Brookings Tax Policy Center, said “if the IRS moves forward with a free product, it could save lower-income families the money they used to give to H&R Block or TurboTax.”

“Tax prep companies are notorious for tricking tax filers into paying for services they should be getting for free,” Williamson said, “so an IRS free file service would be a very welcome step that would save Americans money.”

In 2019, ProPublica wrote about Intuit’s TurboTax and H&R Block Inc.’s efforts to mislead taxpayers away from the federally supported free services for which they qualified. And in May, New York Attorney General Letitia James secured a $141 million settlement with Mountain View, California-based Intuit Inc., which had to pay restitution to some taxpayers.

Intuit withdrew from the Alliance in July 2021, stating in a blog post that the company could provide its benefits without the Free File Alliance’s limitations. H&R Block withdrew from the partnership in 2020.

“Most Americans don’t want the tax collector to also serve as the tax preparer,” said Derrick L. Plummer, a spokesman for Intuit.

“The IRS already has a core mission that it needs to focus on, and creating a new system would cost billions of taxpayer dollars and jeopardize the financial freedom of millions more,” he said. A spokesperson for H&R Block did not respond to an Associated Press request for comment.

Ideas for what a government run free-file program might look like are already being studied.

Bruce Sacerdote, a Dartmouth economist, has examined systems in other countries in which taxpayers don’t have to enter much data on their electronic forms because the government has already done so.

“The IRS has tremendous amounts of information on wages and dividends,” he said, adding that a government-supported tax filing system “could be a wonderful thing.”

Such systems are used in Germany, Japan and other Organization for Economic Cooperation and Development countries that collaborate to develop policies that promote economic growth.

“As a taxpayer, there could be a great benefit to pre-population,” he said. “Filing taxes is enormously time-consuming. Given all the information the IRS has on taxpayers, they could simply send you a completed return.”

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Business

Treasury yields ahead of release of key inflation data

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U.S. Treasury yields ticked downward on Tuesday as traders prepared for key inflation figures due out later this week.

The 2-year dropped 6 basis points to trade at 3.0078% but remained above the 10-year Treasury, which dropped 6 basis points to 2.9225%, dropping back below the 3% mark. The yield on the 30-year Treasury bond traded 5 basis points lower at 3.1257%. Yields move inversely to prices, and a basis point is equal to 0.01%.

Markets are awaiting key inflation data this week. June’s consumer price index, scheduled for release Wednesday, is forecast to show headline inflation rising above May’s 8.6% level. That inflation figure also applies to energy and food.

All three major U.S. stock indexes closed in negative territory Monday.

The National Federation of Independent Business optimism index for June, which focuses on small businesses, is set to be published Tuesday, as is the IBD/TIPP Economic Optimism Index, which is the earliest monthly survey of consumer confidence.

The U.S. will also be releasing its Redbook for July, a sales-weighted record of year-on-year growth among a selection of large retailers representing some 9,000 stores. The 52-week bill is set for auction Tuesday.

Friday’s June employment report showed jobs growing at a faster rate than expected. Nonfarm payrolls increased 372,000 last month, according to the Bureau of Labor Statistics. Economists predicted the U.S. economy would add 250,000 jobs, according to the Dow Jones.

President Joe Biden is beginning his Middle East trip, which will include a visit to Saudi Arabia and meetings with OPEC leaders in an effort to push for higher oil production to ease prices.

U.S. Treasury Secretary Janet Yellen will meet with Japanese Finance Minister Shunichi Suzuki on Tuesday to discuss further sanctions against Russia for its war in Ukraine.

Gold hit its lowest level since late September as the dollar reached a two-decade high, trading at $1,732.40 per ounce at 8:30 a.m. in London.

On Friday, yields had jumped following the jobs report, on the assumption that the U.S. Federal Reserve will be more aggressive with its rate-hiking path.

—CNBC’s Samantha Subin and Matt Clinch contributed to this report.

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Treasury Secretary Janet Yellen says recession isn’t ‘inevitable

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U.S. Treasury Secretary Janet Yellen testifies before a House Ways and Means Committee hearing on President Biden’s proposed 2023 U.S. budget, on Capitol Hill in Washington, June 8, 2022.

Jonathan Ernst | Reuters

The recession that many Americans fear is coming is not “at all imminent,” Treasury Secretary Janet Yellen said Sunday.

Talk of a recession has accelerated this year as inflation remains high and the Federal Reserve takes aggressive steps to counter it. On Wednesday, the Fed announced a 75 basis point interest rate hike, its largest since 1994. Fed Chair Jerome Powell also indicated the Federal Open Market Committee’s intent to continue its aggressive path of monetary policy tightening in order to rein in inflation.

At the same time, many expect the combination of resilience in consumer spending and job growth to keep the U.S. out of recession.

“I expect the economy to slow,” Yellen said in an interview with ABC’s “This Week.” “It’s been growing at a very rapid rate, as the economy, as the labor market, has recovered and we have reached full employment. It’s natural now that we expect a transition to steady and stable growth, but I don’t think a recession is at all inevitable.”

Although Yellen seemed optimistic about avoiding recession, the global economy is still facing serious threats in the coming months with the continued war in Ukraine, soaring inflation and the Covid-19 pandemic. “Clearly, inflation is unacceptably high,” Yellen said.

Still, she doesn’t believe a drop-off in consumer spending would be the cause of a recession. Yellen told ABC News that the U.S. labor market is the strongest of the post-war period and predicted that inflation would slow “in the months ahead.”



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