Former and Current US Treasury Secretaries Clash Over Biden's Stimulus Plan

Summers "Inflation Pressure Due to Excessive Scale"... Yellen "Necessary for Employment Stability"

Janet Yellen (left) and Larry Summers [Image source= EPA Reuters Yonhap News]

[Asia Economy Reporter Byunghee Park] Former and current U.S. Treasury Secretaries clashed over President Joe Biden's $1.9 trillion stimulus package. Treasury Secretary Janet Yellen argued that the stimulus is necessary to stabilize employment, while former Treasury Secretary Larry Summers warned that the size of the stimulus is too large and could increase inflationary pressures.

On the 7th (local time), Yellen appeared on CNN and said, "The benefits of the Biden administration's COVID-19 relief bill outweigh the risks," adding, "If the stimulus passes Congress, full employment can be achieved next year." She also stated, "I understand the need to consider the risk of too rapid price increases," and "We have policy tools to respond if inflation risks rise."

Yellen's mention of inflation that day was interpreted as a response to Summers' concerns. In a recent Washington Post op-ed, Summers pointed out, "A large-scale stimulus comparable to that during World War II could increase inflationary pressures to levels we have not seen in a century."

Summers fundamentally agreed that a stimulus is necessary. He said, "I believe the economy might have been much better if the Obama administration had spent more than the $787 billion in 2009." However, Summers criticized current Biden administration officials for underestimating the many stimulus measures already implemented. He noted, "It has become more difficult than before to suppress inflation without causing a recession," expressing concern that a large stimulus could lead to inflation.

The two also differed in their views on the government's fiscal burden. Former Secretary Summers expressed concern about the increasing fiscal burden due to large-scale government spending, warning that this might hinder sufficient support for future issues such as climate change and large infrastructure projects.

In response, Secretary Yellen said, "Additional stimulus will be addressed alongside long-term issues," emphasizing that overcoming the COVID-19 crisis is the immediate priority.

Yellen stressed the need to focus on responding to the COVID-19 crisis now. "As Treasury Secretary, I must consider all economic risks. The greatest risk now is that workers and communities are being hurt by COVID-19. We have not responded adequately to the COVID-19 pandemic. Children need to be sent back to school."

Summers is a figure who served in Democratic administrations. He was Treasury Secretary under Bill Clinton and Chairman of the White House Council of Economic Advisers under Barack Obama.

This content was produced with the assistance of AI translation services.