US Treasury Secretary Janet Yellen on Tuesday signaled that President Joe Biden is ready to hike corporate taxes to pay for his administration’s priorities, while Fed Chairman Jerome Powell has once again downplayed fears that inflation will heal Economy would soar from the Covid-19 pandemic.
Yellen’s comments come as Washington lawmakers prepare for Biden’s next move after Congress passed its US $ 1.9 trillion bailout earlier this month.
Biden has vowed to propose a huge infrastructure package soon that will help the United States create jobs and fight climate change, but he’s under pressure to offset the cost of two expensive bills.
In testimony to the House Financial Services Committee, Yellen said the White House would propose raising the corporate tax rate to 28 percent and finding ways to get U.S. companies to relocate more of their business to the U.S.
“I think a package of investing in people and investing in infrastructure will help create good jobs in the American economy, and changes in the tax structure will help fund these programs,” Yellen said.
“We have had a global race for corporate taxation and we hope to end it.”
US media reported Monday that Biden is considering spending $ 3 trillion on infrastructure in the US, which would be split into two bills, despite the White House denying those reports.
Any new move could face difficult opportunities in Congress, where Democrats have a narrow lead in the House of Representatives and are evenly divided with Republicans in the Senate. They relied on special parliamentary tactics to get the American bailout plan through the upper chamber.
– Fears of inflation –
The bill was the third major package passed by the United States after the pandemic hit the economy in March 2020, resulting in tens of millions of jobs lost and a sharp decline in economic growth.
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Unemployment has been falling in recent months and GDP growth is expected to recover this year.
That rebound, along with the US bailout and a $ 900 billion relief passed in December, has fueled equity markets and some economists to worry that the strengthening economy will drive prices higher, which the Fed pushes interest rates up from zero earlier than expected.
In a testimony to the committee, Powell acknowledged that prices, which had remained subdued during the downturn, could rise, but said any rise would be temporary.
“We expect inflation to rise later this year,” said the central bank chief, noting that this would be partly due to the major economic sectors recovering from the deep slumps in March and April 2020, when the business restrictions stopped Covid-19 were most intense.
“We do not expect this impact on inflation will be particularly large or persistent.”
The lows are seen as one reason Wall Street is booming despite the greater discomfort of the pandemic.
The Fed also released a new inflation policy last year designed to keep interest rates low until inflation reaches 2.0 percent and stays there to maximize employment.
cs / dw