Yellen defends higher taxes needed to contain deficit

Janet Yellen, the US Treasury Secretary, urged Congress to stick to the White House’s plan to pay off its $ 4.1 billion investment plans with higher taxes, arguing the country must contain long-term US deficits.

Speaking on Sunday, Yellen defended Joe Biden’s attempt to impose higher levies on businesses and wealthier Americans to fund $ 2.3 billion in infrastructure spending and $ 1.8 billion in infrastructure spending. social programs over the next decade, following criticism from Wall Street, US and Republican companies. legislators.

But Yellen went further, saying it was important to offset the cost of Biden administration spending plans in order to prevent America’s fiscal position from deteriorating. While Republicans ardently oppose any tax increase and some Democrats hesitate over the scale and details of the tax hikes, some lawmakers may be tempted to find a compromise that includes very limited income increases.

“I think we are in a good fiscal position. Interest rates are historically low. They have been like this for a long time and it is likely that they will remain so in the future. But we need fiscal space to be able to deal with emergencies, like the one in which we faced the pandemic, ”Yellen told NBC on Sunday.

“We don’t want to use up all that fiscal space and, in the long run, deficits must be contained to keep our federal finances on a sustainable basis. So I think we should pay for these historic investments, ”she added.

Yellen’s comments come as the Biden administration prepares to start negotiations with Congress to see if a deal can be reached on its sweeping economic program, which comes on top of the $ 1.9 billion stimulus package adopted in March.

Biden is expected to visit Virginia and Louisiana this week to promote his arguments for the economic plans to the American public, following his joint speech to Congress last week which focused heavily on them.

On the infrastructure plan, which the White House unveiled over a month ago, Republicans have made a counter-offer worth $ 568 billion in spending, and party lawmakers have suggested a increased user fees to pay for at least part of the plan. , although many Democrats are skeptical.

“There are ways to make it happen,” Rob Portman, Republican Senator from Ohio, told NBC. “We have phone calls scheduled this week. I met the White House at the end of last week. There is a way forward here if the White House is willing to work with us. “

Ron Klain, the White House chief of staff, said he was confident a deal could be made, saying Biden’s two “red lines” in the talks were that taxes would not increase for anyone. would earn less than $ 400,000 per year, and “inaction” was not an option.

“We have time to talk to people on both sides, to find common ground, to find what people agree on as mutually shared interests. I am optimistic that we can make progress in this area in the weeks to come, ”he told CBS.

Biden’s push comes as the U.S. economy accelerates rapidly out of its winter slump, thanks to a rapid rollout of vaccination and the impact of the stimulus bill. Some Republican economists and lawmakers have expressed concern about the risk of overheating Biden’s future budget plans for the U.S. economy, but Yellen has dismissed them.

She said the new spending would occur after stimulus funds have already been spent, and that “demand stimulation is moderate” as it will be spread over eight to ten years.

Yellen also said the Federal Reserve has the capacity to deal with any spike in inflation. “We will be monitoring this very carefully,” she said. “We are proposing that the expenses be paid. And I don’t think inflation will be a problem, but if it becomes a problem, we have tools to address it. These are historic investments that we need to make our economy productive and fair.

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