Treasury Secretary Janet Yellen said Wednesday that the stimulus spending signed into law by President Joe Biden to aid the U.S. recovery from the Covid-19 pandemic may have contributed “a little bit” to the country’s subsequent inflation woes.
But the widespread rise in prices that marred the Democrat’s administration was mostly “a supply-side phenomenon” caused by the pandemic itself, Yellen told CNBC’s “Money Movers” in an exit interview before leaving her role.
There were “simply huge supply chain problems,” she said, adding that shortages of critical goods “started pushing up prices a great deal.”
Yellen said she believed the $1.9 trillion Covid relief bill and other spending was necessary, and she did not answer directly when asked if she has any regrets about it.
Instead, she urged Americans to recall that the pandemic was “raging out of control” when Biden took office, with thousands of people dying from the virus each month and a high unemployment rate threatening livelihoods.
“It was really important to spend the money to alleviate that suffering,” she said.
Yellen also argued that the Biden administration prioritized deficit reduction, and she pushed back on critics who point to facts such as ballooning U.S. deficits that hit $1.8 trillion in the last fiscal year.
“Interest rate increases have led to higher costs of servicing the outstanding debt. That’s one factor that’s been involved,” she said. “But discretionary spending is at historically low levels.”
Asked about President-elect Donald Trump‘s so-called Department of Government Efficiency, the outside advisory group co-led by Elon Musk and tasked with proposing massive government spending cuts, Yellen sounded skeptical.
“It’s hard to see how the math on that works,” she said.
She noted that “many feel that defense spending should go up,” and that so-called mandatory spending programs — such as Social Security, Medicaid and Medicare — are broadly popular and would be difficult to cut.
“It’s hard to see how you could solve the deficit that way,” she said.
Yellen, 78, who led the Treasury throughout Biden’s four-year term, is set to be replaced by hedge-fund executive Scott Bessent.
Yellen said Bessent’s extensive market experience is “a very helpful background” for a candidate seeking to take charge of the agency responsible for managing the nation’s financial security.
“I’m pleased to see somebody with experience who will be … taking over, presumably, if confirmed by the Senate,” Yellen said.
As for her own post-Treasury plans, Yellen said, “I’m going to take a vacation.”
She added that she will likely return to the Brookings Institution, “and just do some writing and reflecting on my experiences over the last four years.”