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Treasury Secretary And Fed Chair Testify On The Economic Outlook From The Pandemic

AUDIE CORNISH, HOST:

Earlier this year, Treasury Secretary Janet Yellen urged lawmakers to act big and pass the president's $1.9 trillion rescue plan. They did, and today Yellen was back on Capitol Hill to say thanks.

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JANET YELLEN: With the passage of the rescue plan, I'm confident that people will reach the other side of this pandemic with the foundations of their lives intact.

CORNISH: Yellen appeared before a House committee this afternoon, along with Federal Reserve Chairman Jerome Powell. Both say aggressive spending by Congress is giving a boost to the economy, though they both cautioned the recovery is still far from complete. NPR's Scott Horsley joins us now with the details. And, Scott, both Yellen and Powell are sounding, I guess, more confident than they were a few months ago. What's changed?

SCOTT HORSLEY, BYLINE: You know, Audie, the picture has improved in recent months. Consumer spending is up thanks in part to government relief payments. More people are now getting vaccinated. To be sure, millions of folks are still out of work, but Yellen says with the boost from the government, the U.S. could be back to full employment by next year. Now, of course, House Republicans were united in their opposition to the president's relief package. Kentucky Congressman Andy Barr dismissed it this afternoon as a Keynesian wish list.

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ANDY BARR: I fear the toxic cocktail of massive deficit spending, increasing risk of inflation, higher long-term interest rates will stifle long-term prosperity.

HORSLEY: Fed Chairman Powell has been trying to tamp down concerns about inflation. He said once again today that while we are likely to see some price increases as spending picks up this year, those increases are not likely to be either large or long-lasting.

CORNISH: And that rescue bill relies on borrowed money. The administration is now talking about an even bigger spending package for infrastructure, for other investments, and that might require some tax increases. So what are lawmakers or the treasury secretary saying about the prospect of that?

HORSLEY: Republicans are certainly allergic to any talk of a tax increase. But Yellen says the administration is considering some increases, notably in the corporate tax rate, which the GOP slashed back in 2017. She was also asked about a new paper that came out this week showing the wealthiest Americans are not paying taxes on a chunk of their income because they're hiding it from the IRS. And Yellen says that's something she wants to crack down on.

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YELLEN: This is something that would be both fair and not involve any increase in tax rates or burdens. It would make sure that those who are supposed to pay do.

HORSLEY: That would take more resources, though, Yellen says. The IRS enforcement budget has been cut by about 25% over the last decade. And, you know, the IRS is busier than ever these days, Audie, and not only collecting taxes but also delivering those relief payments. And pretty soon, they're going to have to deliver a new subsidy for children as well.

CORNISH: This was an economic hearing, but I gather there were a lot of questions about climate change. Why? What did you hear?

HORSLEY: Yeah. The Federal Reserve has begun to look at financial risks associated with climate change, and Republicans in states like Texas and Kentucky are worried that could make it harder for industries like oil and coal to get financing. So Fed Chairman Powell was asked repeatedly about that today. He says this assessment is still in the early stages, but he characterized it as just part of the Fed's long-running mission to safeguard financial stability. A lot of Republican lawmakers have been trying to put the brakes on that review, but Powell so far seems unfazed.

CORNISH: That's NPR's chief economics correspondent Scott Horsley.

Thank you for your reporting.

HORSLEY: You're welcome.

(SOUNDBITE OF POLAR BEAR'S "PEEPERS") Transcript provided by NPR, Copyright NPR.