WEBVTT - Treasury Secretary Janet Yellen Talks Inflation; US Economy 0:00:02.440 --> 0:00:06.760 Bloomberg Audio Studios, podcasts, radio news. 0:00:07.040 --> 0:00:10.240 We welcome our TV audience and radio listeners here in Virginia. 0:00:10.280 --> 0:00:13.880 I'm sitting down with Treasury Secretary Janet Yellen. Thank you 0:00:13.880 --> 0:00:16.400 so much, Madam Secretary, for joining Bloomberg. 0:00:16.040 --> 0:00:17.079 Thanks to the invitation. 0:00:17.360 --> 0:00:20.760 We're in Stafford County. This is a county that Trump 0:00:20.840 --> 0:00:23.960 won in twenty sixteen but flipped to Biden in twenty twenty, 0:00:24.320 --> 0:00:27.000 and you're here to talk about the fiscal agenda that 0:00:27.000 --> 0:00:30.159 we've seen out of this administration, bringing highlighting. You're going 0:00:30.200 --> 0:00:32.920 to highlight there's millions of dollars to broadband in rural 0:00:32.960 --> 0:00:37.120 areas like Virginia. Yet when you look at consumer sentiment 0:00:37.320 --> 0:00:39.720 recent on Friday the Michigan Serve, and you look at 0:00:39.720 --> 0:00:42.000 recent polls, inflation remains. 0:00:41.680 --> 0:00:43.280 Top of vine for American voters. 0:00:43.680 --> 0:00:45.839 How do you get them to potentially look at the 0:00:45.840 --> 0:00:48.640 way you look at how the economy is working well. 0:00:48.960 --> 0:00:52.320 The cost of living in many areas is very high, 0:00:52.800 --> 0:00:57.680 and it is a concern to Americans, and it is 0:00:57.800 --> 0:01:02.640 President Biden's top priceority to do all he can to 0:01:02.720 --> 0:01:07.440 bring down the cost of living. Why I'm here in 0:01:07.520 --> 0:01:12.080 Stafford County though, is it really illustrates one way in 0:01:12.160 --> 0:01:19.759 which that's going to occur. I'm looking at an area 0:01:20.280 --> 0:01:25.600 that has been deprived, has had really no access to 0:01:25.680 --> 0:01:31.839 the Internet at all, sufficiently remote part of Virginia, and 0:01:32.160 --> 0:01:38.399 President Biden has made a commitment that every American household 0:01:38.680 --> 0:01:43.759 and business should have access to the Internet, and funds 0:01:43.840 --> 0:01:47.480 that were included in the American Rescue Plan that was 0:01:47.520 --> 0:01:52.000 passed in twenty twenty one and then later the bipart 0:01:52.120 --> 0:01:57.760 is an Infrastructure Bill provided substantial funding to make sure 0:01:57.880 --> 0:02:04.960 that the Internet is available everywhere and that it's also affordable. 0:02:05.400 --> 0:02:09.840 And what we saw during the pandemic is that access 0:02:09.880 --> 0:02:17.880 to the Internet is critical to education, to jobs, to healthcare, 0:02:18.520 --> 0:02:23.160 and it's really a critical tool that every family needs 0:02:23.200 --> 0:02:27.639 to have access to. And so making that available and 0:02:27.680 --> 0:02:30.720 making sure it's affordable, which is what I'm going to 0:02:30.720 --> 0:02:37.280 be seeing here today. Project that has succeeded in reaching 0:02:37.320 --> 0:02:42.639 about seven hundred households in this area. This is one 0:02:42.680 --> 0:02:46.720 way in which President Biden's working to lower the cost 0:02:46.760 --> 0:02:50.120 of living, but there are many other areas as well. 0:02:51.120 --> 0:02:56.560 Prescription drugs brought down the cost of insulin to thirty 0:02:56.600 --> 0:03:01.800 five dollars a month, working very hard to bring down 0:03:01.880 --> 0:03:06.040 the cost of energy. At the same time, we're protecting 0:03:06.120 --> 0:03:13.119 the environment and bolstering the finances of households by extending 0:03:13.560 --> 0:03:16.959 the child tax credit and an income tax credit. 0:03:17.280 --> 0:03:19.920 If inflation, though, is still top of mind of American 0:03:20.919 --> 0:03:25.520 Americans today, why then tomorrow, or it's likely expected the 0:03:25.520 --> 0:03:27.920 bid administration is going to lift the walls even higher 0:03:27.960 --> 0:03:33.480 when it comes to Chinese goods, why then raised tariffs? 0:03:33.520 --> 0:03:40.120 The President believes that it's critically important for the United 0:03:40.160 --> 0:03:44.160 States to have a role and a presence in strategic 0:03:44.280 --> 0:03:49.800 industries like semiconductors and like clean energy that are going 0:03:49.920 --> 0:03:55.840 to be the foundation of good jobs and national security 0:03:55.960 --> 0:04:01.280 in the decades ahead. He believes it's receptible, as I do, 0:04:01.720 --> 0:04:06.920 to be completely dependent on China in these areas, and 0:04:08.040 --> 0:04:12.400 he wants to make sure, given that China is really 0:04:12.440 --> 0:04:16.279 not playing by the rules in the sense they have 0:04:16.520 --> 0:04:22.880 enormous subsidies in critical areas of advanced manufacturing has resulted 0:04:22.960 --> 0:04:27.640 in over capacity, he wants to make sure that the 0:04:27.680 --> 0:04:33.400 stimulus that's being provided through the Inflation Reduction Act to 0:04:33.480 --> 0:04:37.320 support these industries. And these are industries that are creating 0:04:37.839 --> 0:04:43.760 good manufacturing jobs in parts of the country that have 0:04:43.839 --> 0:04:49.400 been overlooked or have suffered from de industrialization in the past. 0:04:49.880 --> 0:04:54.120 The President wants to make sure that he protects these investments. 0:04:54.480 --> 0:04:56.880 And I don't want to get ahead of the three 0:04:56.920 --> 0:05:00.560 to zero one review on tariffs, but this is a 0:05:00.560 --> 0:05:04.840 commitment that UH President Biden has made and I agree 0:05:04.880 --> 0:05:06.960 with that. I was in China just a couple of 0:05:07.000 --> 0:05:11.000 weeks ago and made clear that we would not allow 0:05:11.160 --> 0:05:17.160 Chinese over capacity to harm our emerging industries. 0:05:17.279 --> 0:05:20.080 Does the US want a trade war though with China? 0:05:20.520 --> 0:05:23.800 We w We believe that we should have a deep 0:05:23.920 --> 0:05:27.920 and productive and that we do in most areas UH 0:05:27.960 --> 0:05:34.040 trade and investment relationship. We're working to stabilize our economic relationship. 0:05:35.240 --> 0:05:40.120 We do not wish to disengage from China economically, but 0:05:40.240 --> 0:05:43.039 we do think that the playing field should be fair, 0:05:43.680 --> 0:05:50.080 and China engages in unfair practices like massive subsidies of 0:05:50.160 --> 0:05:56.120 industries they have decided are critical, and those are cases 0:05:56.200 --> 0:05:58.760 where we will act to protect ourselves. 0:05:58.880 --> 0:06:01.279 We've seen Beijing in the past as though respond and 0:06:01.320 --> 0:06:02.520 it's become tit for tat. 0:06:02.600 --> 0:06:03.960 Are you expecting a response? 0:06:03.960 --> 0:06:06.760 Could they go after Tesla or maybe American farm products? 0:06:07.360 --> 0:06:12.440 Well? President Biden believes that anything we do should be 0:06:12.880 --> 0:06:19.360 targeted to our concerns and not broad based. And hopefully 0:06:19.480 --> 0:06:23.680 we will not see a significant Chinese response, but that's 0:06:23.680 --> 0:06:24.920 always a possibility. 0:06:25.160 --> 0:06:27.240 China is big focus going into the election. 0:06:27.360 --> 0:06:29.719 We hear the former president also talk about he wants 0:06:29.720 --> 0:06:33.440 to put a sixty percent import tariff potential and all 0:06:33.520 --> 0:06:36.640 Chinese goods. He also over the weekend was talking about 0:06:36.920 --> 0:06:39.720 the Trump era tax cuts that are set to expire 0:06:39.880 --> 0:06:43.240 next year. Trump over the weekend said, Biden will give 0:06:43.279 --> 0:06:45.320 you a tax hike. If it was up to Trump, 0:06:45.680 --> 0:06:48.320 it would be a cut on upper middle, lower and 0:06:48.400 --> 0:06:52.240 the business class. Are you envisioning these tax cuts to 0:06:52.279 --> 0:06:53.520 be extended. 0:06:54.400 --> 0:06:57.640 Well, what President Biden has said, and I certainly strongly 0:06:57.760 --> 0:07:00.719 agree with it, is that we want to make sure 0:07:00.760 --> 0:07:05.839 that working families earning under four hundred thousand dollars are 0:07:05.880 --> 0:07:10.240 not faced with the tax hike, but all of the 0:07:10.280 --> 0:07:15.880 wealthy individuals and corporations that benefited from the Tax Cut 0:07:15.880 --> 0:07:19.160 and Jobs Act, where there are provisions that are going 0:07:19.240 --> 0:07:25.760 to expire. The President, for the sake of working families 0:07:25.800 --> 0:07:31.320 and tax fairness, believes that the rich incorporation should pay 0:07:31.360 --> 0:07:35.880 their fair share. And I would say that CBO. The 0:07:35.920 --> 0:07:42.200 Congressional Budget Office recently estimated that extending all of the 0:07:42.240 --> 0:07:47.720 provisions of TCJA would cost five trillion dollars over the 0:07:47.760 --> 0:07:52.280 next decade. And we really do need to be on 0:07:52.520 --> 0:07:57.760 a fiscally sustainable path. The President has already signed and 0:07:57.840 --> 0:08:02.480 put into effect a trillion dollars of deficit reduction over 0:08:02.520 --> 0:08:07.200 the next decade, and he's proposed in his twenty twenty 0:08:07.280 --> 0:08:13.360 five budget in additional three trillion dollars worth of deficit reduction. 0:08:14.000 --> 0:08:17.040 It really is critical that we are in a fiscally 0:08:17.480 --> 0:08:23.520 sustainable path. So TCJA, the bulk of the benefits went 0:08:23.560 --> 0:08:30.200 to the wealthy and to corporations. It blew away the deficit. 0:08:30.440 --> 0:08:34.839 It caused huge increase in the deficit. It promised an 0:08:34.880 --> 0:08:36.720 investment boom, and we didn't see it. 0:08:36.960 --> 0:08:41.520 So should tax revenues be used to lower the deficit? Yes, 0:08:43.040 --> 0:08:45.599 that one for Biden or where they go to social programs? 0:08:46.160 --> 0:08:46.400 Well. 0:08:47.000 --> 0:08:52.280 President Biden believes it's important to invest in areas of 0:08:52.320 --> 0:08:57.080 the economy that will help us grow and create good jobs, 0:08:57.600 --> 0:09:03.640 and his budget is won that proposes helping working families 0:09:03.960 --> 0:09:08.840 and undertaking investments that are critical to our future, but 0:09:09.040 --> 0:09:14.600 also raising taxes on wealthy individuals who he believes they 0:09:14.600 --> 0:09:20.800 are not paying their fair share, and raising taxes on 0:09:20.960 --> 0:09:26.920 corporations that are doing extremely well, and he would both 0:09:26.960 --> 0:09:31.720 invest in America and help working families and lower the deficit. 0:09:32.080 --> 0:09:34.920 The US at the moment is spending just as much 0:09:35.000 --> 0:09:37.840 every year at this point on paying off our debt 0:09:37.880 --> 0:09:41.120 as it is funding our military. Just the usd lower 0:09:41.160 --> 0:09:43.520 interest rates in order to balance the budget. 0:09:43.640 --> 0:09:47.679 Well, we have to take the interest rate path that 0:09:48.400 --> 0:09:54.680 prevails in the economy as given. The President's budget incorporates 0:09:54.760 --> 0:09:58.760 the assumption that interest rates will be in line with 0:10:00.320 --> 0:10:05.320 the projections of private sector forecasters. So there has been 0:10:05.360 --> 0:10:11.080 an increase in the interest rate path that's assumed, and 0:10:11.280 --> 0:10:15.040 it's necessary to make sure that we're in a fiscally 0:10:15.200 --> 0:10:19.600 sustainable path. Of course, the higher interest rate path makes 0:10:19.600 --> 0:10:26.400 that more difficult, but the president's budget would hold I 0:10:26.480 --> 0:10:32.240 see the key metric that summarizes the burden of deficits 0:10:32.280 --> 0:10:38.280 as being its interest cost, and the President's plan would 0:10:38.320 --> 0:10:44.920 hold interest costs at historical levels and not allow them 0:10:45.000 --> 0:10:46.400 to rise above that. 0:10:46.760 --> 0:10:49.040 The federal deficit, though now, is at a level we 0:10:49.080 --> 0:10:52.480 really don't see outside of recessions. Is anyone in Washington 0:10:52.640 --> 0:10:57.520 seriously concerned about this, real conversations about bringing debt back 0:10:57.559 --> 0:10:59.440 to a sustainable path. 0:11:00.080 --> 0:11:04.680 Well, as I said, the interest cost of the debt 0:11:05.120 --> 0:11:09.160 is a good way to measure its burden. Generally, interest 0:11:09.200 --> 0:11:13.079 rates have been lower in spite of recent increases, they 0:11:13.120 --> 0:11:16.640 have been lower than they were in past decades. And 0:11:17.240 --> 0:11:22.679 that means that metrics like the ratio of debt to GDP, 0:11:25.120 --> 0:11:31.040 we can probably manage and have a fiscally sustainable path 0:11:31.440 --> 0:11:35.800 with somewhat higher ratio of debt to GDP. But it's 0:11:35.840 --> 0:11:39.760 important to make sure that the real interest burden of 0:11:39.800 --> 0:11:44.800 the debt, which is a measure of the burden it's 0:11:44.880 --> 0:11:48.559 placing our economy, we have to make sure that that 0:11:48.679 --> 0:11:52.319 stays in historically normal level. 0:11:52.640 --> 0:11:55.400 This isn't just a complain of fiscal hawks either. This 0:11:55.480 --> 0:11:57.439 is a complaint. I heard a lot at the IMF 0:11:57.520 --> 0:11:59.600 World Bank meetings. A lot of countries are lining up 0:12:00.080 --> 0:12:02.520 learned about the path that the US is on and 0:12:02.559 --> 0:12:04.679 what also that means for the US dollar. I hurt 0:12:04.720 --> 0:12:07.400 a lot of people reminiscent of the Nixon times say 0:12:08.040 --> 0:12:11.600 the US it's our currency, but it's your problem, is 0:12:11.640 --> 0:12:14.679 it right? In that context, then that other countries should 0:12:14.679 --> 0:12:16.880 be intervening well. 0:12:17.920 --> 0:12:25.600 Our position is that major countries like those in the 0:12:25.679 --> 0:12:29.040 G seven, and this has been agreed in the G seven, 0:12:29.559 --> 0:12:36.720 should have market determined exchange rates, and if intervention occurs, 0:12:37.160 --> 0:12:42.199 it should be rare, well communicated, and largely to address 0:12:42.520 --> 0:12:50.040 excessive fluctuations in currencies. That's the system that we essentially 0:12:50.120 --> 0:12:53.400 have in place, and I think it's worked well. And 0:12:53.480 --> 0:12:58.320 of course differences in the stance of monetary policy across 0:12:58.360 --> 0:13:03.080 countries is a factor that influences the value of exchange rates. 0:13:03.200 --> 0:13:04.760 I'm sure this is going to come up on your 0:13:04.800 --> 0:13:06.520 next trip. You're going to be meeting with your G 0:13:06.640 --> 0:13:10.800 seven partners in Italy. There have been reports that Japan 0:13:10.880 --> 0:13:14.440 has intervened twice. You've said it should be communicated, it 0:13:14.440 --> 0:13:16.840 should be rare, but they actually haven't worked. 0:13:16.880 --> 0:13:18.160 So why does it matter. 0:13:18.800 --> 0:13:23.600 Well, look, I'm not going to comment on a situation 0:13:23.840 --> 0:13:26.880 in a specific country. I just want to leave it 0:13:26.960 --> 0:13:36.839 as when there is excessive volatility, it's possible for countries 0:13:36.880 --> 0:13:42.480 to intervene. It doesn't always work without more fundamental changes 0:13:42.520 --> 0:13:46.640 in policy, but we believe that should happen very rarely 0:13:47.040 --> 0:13:51.160 and be communicated to trade partners. If it does. 0:13:52.120 --> 0:13:54.199 Just on a final point and in this FX world, 0:13:54.240 --> 0:13:55.640 you're gonna get your G seven partners. 0:13:55.840 --> 0:13:58.120 Do you have a currency pair that you watch the most? 0:14:00.080 --> 0:14:06.080 Watch certainly the value of the dollar visa V major 0:14:06.160 --> 0:14:10.920 currencies like the Euro, the en, the remnant b but 0:14:11.520 --> 0:14:13.720 what your currency developments generally. 0:14:14.400 --> 0:14:17.199 Excellent, Treasure Secretary Janet Yellen, We thank you so much 0:14:17.240 --> 0:14:20.040 for your time. That was, of course US Treasury Secretary 0:14:20.120 --> 0:14:24.120 Janet Yellen in Virginia talking about and highlighting the millions 0:14:24.160 --> 0:14:26.920 of dollars that have come out of the fiscal agenda 0:14:26.920 --> 0:14:30.400 of the Biden administration, and today during this Infrastructure Week, 0:14:30.600 --> 0:14:33.520 it is about expanding broadband in royal areas.