Yellen says spending bill would lower inflation, reduce household costs

Treasury Secretary Janet Yellen told CNBC during an interview on Friday that the spending bill that Democrats are proposing would lower inflation by reducing household costs including health care.

“I don’t think that these investments will drive up inflation at all. First of all, they’re fully paid for and not by imposing higher taxes on anyone earning under $400,000. But by asking corporations, high-income individuals to pay their fair share, and by investing in the Internal Revenue Service so that they can boost compliance which has fallen to low levels,” Yellen said during an interview in Rome, where she is attending the Group of 20 conference.

“For many American families experiencing inflation, seeing the prices of gas and other things that they buy rise, what this package will do is lower some of the most important costs — what they pay for health care, for child care, and it’s anti-inflationary in that sense as well,” she added.

The Commerce Department released data Friday indicating that inflation largely stayed stagnant in September. Higher inflation has been persistent in recent months despite assumptions that it would start to trend downward later this year. 

The inflation comes in part due to a supply chain crisis and labor shortage as industries struggle to keep up with a resurgence in demand among Americans prompted both by the effectiveness of COVID-19 vaccines and by federal aid. 

Earlier this week, however, Yellen estimated that by the second half of 2022, inflation rates would normalize again. 

Yellen’s remarks come as Democrats are determining how to pay for a spending bill filled with their party’s priorities. A proposal to tax corporations’ profits at 15 percent, which would affect roughly 200 companies, this week gained support from Sen. Kyrsten Sinema (D-Ariz.), one of two moderates whose support Democrats are seeking to gain.

A separate proposal that would require gross annual inflows and outflows of financial accounts in the U.S. over $10,000 to be reported to the IRS, however, is facing some criticism among Democrats.