US Economy ‘On the Right Track,’ Yellen Says on 1st Anniversary of Inflation Reduction Act

U.S. Secretary of the Treasury Janet Yellen delivers remarks at Johns Hopkins University’s School of Advanced International Studies (SAIS) in Washington on April 20, 2023. (Anna Moneymaker/Getty Images)

The U.S. economy is “on the right track” because of the significant investments emanating from President Joe Biden’s signature Inflation Reduction Act, Treasury Secretary Janet Yellen said close to the first anniversary of the legislation’s signing.

Ms. Yellen delivered an economic pitch to the International Brotherhood of Electrical Workers 357 Training Center close to the Las Vegas strip, championing the current administration’s record on the economy.

“Over the past year, our task has been to transition the economy from rapid recovery to stable growth,” she said in a prepared address. “Our path so far shows that we are on the right track, even as we remain vigilant about potential challenges and uncertainties.”

The Inflation Reduction Act was signed into law by President Biden on Aug. 16, 2022, after narrowly passing the Senate 51–50.

The CHIPS and Science Act and the Bipartisan Infrastructure Law were also cited as contributors to the economic gains, with Ms. Yellen explaining that “Americans are beginning to see in their daily lives the impact of that, but there’s a lot more coming down the pike.”

During her speech in the key swing state, Ms. Yellen highlighted various positive developments in the U.S. economy, including inflation and the labor market. With the annual consumer price index easing from 9.1 percent in June 2022 to 3.2 percent last month, “workers are better off than they were last year.”

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Ms. Yellen also repeated the administration’s assertion that President Biden had created more than 13 million jobs, although some argue that this is a misleading figure because nearly 10 million of these positions were returned from the coronavirus pandemic.

She also emphasized factory construction activity, saying, “The explosion in U.S. factory construction is a uniquely American story, one that we do not see replicated in other peer countries.”

Despite the approximately $500 billion in committed clean energy and manufacturing investments, the manufacturing sector is stuck in a recession. The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index and the S&P Global’s Manufacturing PMI—gauges of the direction of the sector—were in contraction again in July.

Moreover, Ms. Yellen highlighted major investments in “boosting semiconductor manufacturing and incentivizing investments in cutting edge R&D.” However, the $52.7 billion federal subsidy package to re-shore the semiconductor supply chain has hit a roadblock as some companies have said they haven’t received the funds from the U.S. government.

She touted the framework of “modern supply-side economics” inside Bidenomics, a moniker for the president’s economic doctrine.

According to the Treasury Department chief, this tenet of President Biden’s philosophy not only focuses on growth but also concentrates on developing “a fairer and more sustainable economy.”

“I feel very good about U.S. prospects overall,” she said.

President Joe Biden takes pictures with guests after speaking at an event celebrating the passage of the Inflation Reduction Act on the South Lawn of the White House on Sept. 13, 2022. (Anna Moneymaker/Getty Images)

Bidenomics and the Polls

President Biden, Vice President Kamala Harris, and other leading administration officials have been trying to sell Bidenomics heading into the 2024 election cycle.

But polling data suggest that many Americans, including those who voted for President Biden in 2020, aren’t confident in the U.S. economy.

A recent Reuters-Ipsos poll found that 42 percent of Biden’s 2020 voters said the economy was “worse” than it was in 2020. Thirty-three percent said that it was “better,” and 24 percent described it as “about the same.”

Another CNN survey released earlier this month found that 63 percent disapproved of the way President Biden is handling the economy, and 70 percent disapproved of how he has tackled inflation.

Last month, the CNBC All-America Economic Survey reported that President Biden’s economic approval rating was just 37 percent, as only 20 percent stated that the economy is excellent or good.

When asked about these numbers by host Erin Burnett on CNN’s “Outfront” on Aug. 14, Ms. Yellen purported that Americans are feeling better off.

“Americans know best, I think, about their own personal finances,” she said. “And it is important to recognize that when they’re asked how are they personally doing, over 70 percent of Americans say that they’re very comfortable with their financial situation. So, they seem to perceive the economy as a whole as doing less well than they are personally.”

Indeed, consumer sentiment has bounced back from record lows seen in early 2022. The University of Michigan’s Consumer Sentiment Index came in at 71.2 in August, the second-highest reading since October 2021. The UMich Current Economic Conditions also jumped to 77.4, the highest in nearly two years.

Inflation forecasts have also improved. According to the Federal Reserve Bank of New York’s Survey of Consumer Expectations (SCE), year-ahead inflation expectations fell to 3.5 percent in July, down from 3.8 percent in June. Moreover, the share of respondents anticipating being better off a year from now is at the highest level since September 2021.

However, data suggest that the state of the consumer might not be as strong as White House officials say. For example, recent data from the New York Fed show that household debt climbed to a record high of $17.06 trillion in the second quarter, credit card debt has topped $1 trillion, and delinquency rates are increasing.

Second Thoughts

Following the Inflation Reduction Act proposal, many critics contended that the public policy pursuit had little to do with fighting inflation.

One year later, even President Biden is expressing regret over the landmark legislation’s name.

President Joe Biden speaks at an Arcosa Wind Towers Inc. manufacturing facility in Belen, N.M., on Aug. 9, 2023. (Madalina Vasiliu/The Epoch Times)

At an Aug. 9 campaign reception in Albuquerque, New Mexico, President Biden said that “it has nothing to do with inflation” and more to do with “the single-largest investment in climate change anywhere in the world.”

“I wish I hadn’t called it that because it has less to do with reducing inflation than it has to do with providing alternatives that generate economic growth,” President Biden said at a Utah fundraiser on Aug. 10.

Many analyses in 2022, including from the Congressional Budget Office (CBO) and the University of Pennsylvania’s Penn Wharton Budget Model (PWBM), concluded that the Inflation Reduction Act would do little to fight inflation.

“In calendar year 2022, enacting the bill would have a negligible effect on inflation, in CBO’s assessment,” the nonpartisan budget watchdog wrote in a report. “In calendar year 2023, inflation would probably be between 0.1 percentage point lower and 0.1 percentage point higher under the bill than it would be under current law.”

“The impact on inflation is statistically indistinguishable from zero,” PWBM staff wrote.

Since President Biden took office, consumer prices have surged nearly 16 percent, while wages are down by about 2.7 percent.