Yellen defended the Biden administration’s economic policies. He highlighted that although inflation increased temporarily, economic growth and reduced unemployment were key achievements.
The Secretary of the Treasury, Janet Yellendefended the economic performance of the administration of Joe Biden in his last official public policy speech, arguing that the United States outperformed its rivals. He also described the most difficult decisions the outgoing president would have had to make to keep inflation stable after the pandemic.
Yellen noted that the unemployment rate would have had to increase between 10% and 14%which would mean between 9 and 15 million unemployed people to keep inflation at 2% during 2021 and 2022.
The unemployment rate peaked at 14.8% in 2020, before President Joe Biden took office, and fell from 6.4% in January 2021, when he began his term.
However, consumer price inflation rose to 9% in 2022, before falling below 3% in the second half of 2024. The scars of high inflation played a key role in President-elect Donald Trump’s victory on Vice President Kamala Harris, exit polls showed.
Yellen’s assessment
“An important ‘what if’ exercise would be to ask: How much more would unemployment have risen if there had been enough of a fiscal contraction to keep inflation at the Fed’s 2% target?” Yellen said. “The answer is ‘a lot,’ although the exact magnitude depends significantly on some key parameters, particularly the slope of the Phillips curve, which measures the sensitivity of inflation to a demand-induced contraction in output.”
Janet Yellen
Photo: Getty Images
By contrast, the United States experienced real GDP growth—that is, growth excluding inflation—of 11.5% from the end of 2019 to the third quarter of 2024. In comparison, Canada grew 7.3% and Italy 5.6%. % during that same period, Yellen said.
Wages also rose, with the UK the only G7 country to also record substantial real wage gains, while in Germany, Japan and Italy these fell.
Source: Ambito
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