Michael Collins & Joey Garrison, USA Today
Treasury Secretary Janet Yellen tried 15 months ago to shut down some economists’ concerns that President Joe Biden’s $1.9 trillion economic relief package could fuel rising prices.
“Is there a risk of inflation?” Yellen said on ABC’s “This Week” in March 2021, three days after Biden signed the American Rescue Plan into law. “I think there’s a small risk. And I think it’s manageable.”
On Tuesday, as inflation is at a 40-year high, Yellen admitted on CNN, “I was wrong then about the path that inflation would take.” She said she hadn’t fully understood the impact of what she called “unanticipated and large shocks” to the economy and supply chain bottlenecks that boosted energy and food prices.
Yellen’s mea culpa was the most direct admission from the Biden administration that it failed to grasp the scale of inflation that would come as the country recovered from the coronavirus pandemic.
Even as the cost of gas, food and other consumer goods soared, the administration repeatedly assured Americans the price increases would be temporary.
Economists who sounded the alarm about rising inflation said the warning signs were there all along.
“The most reasonable reading of the evidence back then was that we were going to have an inflation problem if (the economic package) passed,” said Michael Strain, an economist at the American Enterprise Institute, a think tank in Washington. “I think the Fed and the administration were both much too dismissive of that possibility.”
Steven Rattner, economic adviser for President Barack Obama, said much of the blame for inflation falls on Biden’s American Rescue Plan, which gave many Americans $1,400 checks, unleashed a host of social programs and pumped $350 billion into local and state governments.
“We’re all paying the price for having overstimulated this economy during the pandemic and putting too much money into people’s pockets, which created a lot of this inflation,” Rattner said Wednesday on MSNBC’s “Morning Joe.” “There’s no free lunch here. Now we’re all going to have to pay the price.”
“This problem,” Rattner said, “was to a considerable degree self-inflicted, both by our fiscal policy, the stimulus as well as by the Federal Reserve.”