Andrew Harnik/AP Photo
- The Senate recently approved two spending packages totaling close to $4 trillion.
- Treasury Sec. Janet Yellen wrote in an opinion piece that investments are making up for 40 years of underspending.
- She said Biden's economic agenda is "fiscally responsible" and paid for by reforming the tax code.
- See more stories on Insider's business page.
Last week, the Senate approved the $1 trillion bipartisan infrastructure plan, and Senate Democrats passed their $3.5 trillion reconciliation bill, full of measures like childcare, eldercare and universal pre-K. Biden's Treasury Secretary Janet Yellen said those investments are just the things Americans need right now.
Yellen wrote an opinion piece for Yahoo Finance on Tuesday explaining why President Joe Biden's economic agenda to boost the middle class and create jobs is not too much spending, contrary to Republican lawmakers' arguments. She noted that 40 years of underinvesting in public goods, such as national paid leave and childcare, have pushed women out of the labor force and increased racial and gender pay gaps, and Biden's economic plans would give Americans the economy they "should – and can – have."
"I question whether we can if we remain a country where renting a home eats up the lion's share of your paycheck, and owning one is out of the question; where young people can't gain the skills to compete in the job market because they can't afford the tuition bill; or where Americans must make a choice: have children or have a job," Yellen wrote.
Here are three reasons why the trillions in spending Biden has proposed is not an over-investment, according to Yellen:
Real interest rates are negative
Now is the right time, economically, to be making these investments. Real interest rates are negative, meaning borrowers are credited interest instead of paying it to lenders, and the Congressional Budget Office expects interest rates to stay low for at least a decade.
Low interest rates mean more money to spend by consumers, and this could help boost the economy if they use the money to make large purchases on things like homes and cars. So, to Yellen's point, Biden's investments will help further boost the economy given the current and expected low interest rates.
Tax increases will go to the wealthy and corporations, not American families
Biden's proposals are "fiscally responsible," Yellen wrote. The investments are spread out over time and are paid for by raising taxes on the wealthy and corporations without impacting those making below $400,000 a year.
After the Senate passed the bipartisan infrastructure plan, Biden slammed President Donald Trump for racking up $8 trillion in debt from tax cuts and vowed his spending would be fully paid for by tax hikes on the rich.
Biden has remained committed to raising taxes on the wealthy and corporations. When he introduced his infrastructure proposals, he wanted to fund them with a corporate-tax hike to 28%, still only a partial reversal of Trump's 2017 corporate-tax cut. He said at the time that he was "sick and tired of ordinary people being fleeced."
Republicans have strictly opposed raising taxes on the wealthy and corporations, leading Democrats to put wealthy tax hikes in their reconciliation bill, which can be passed without any Republican votes.
It will be a lot more expensive to not invest in infrastructure
The opportunity cost of not making Biden's proposed investments is high. "We've grown used to America as the world's greatest economic power, but we aren't destined to stay that way," Yellen wrote.
The price tag of Biden's American Jobs Plan was originally $2 trillion, but moderate and Republican concerns on the plan being too costly led to a bipartisan agreement that ended up cutting over half the cost of the president's initial proposal. Those cuts included care-economy measures, like eldercare and climate initiatives, that are now in the Senate Democrats' reconciliation bill.
Insider reported last week that nine moderate House Democrats threatened to block the reconciliation bill until the infrastructure bill passes the House and gets signed into law, prompting criticism from progressives who have been stressing the need to pass the care-economy package alongside infrastructure.
"Let's stop pretending that Dems who threaten to tank the President's agenda, kill childcare/Medicare expansion, and work w/ GOP to expand the cruelest parts of our immigration system are "'moderate,'" New York Rep. Alexandria Ocasio-Cortez wrote on Twitter. "They are not moderate. They're conservative."