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Tipsheet

Yellen: So, I Was Wrong About Inflation

AP Photo/Craig Ruttle

After a year of rapidly rising inflation on everyday essential items Americans need, the Biden administration is finally acknowledging the problem exists. 

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Treasury Secretary Janet Yellen, who used to serve as the head of the Federal Reserve, is admitting she was wrong about inflationary pressures. 

When inflation started rising in spring 2021, shortly after President Joe Biden signed the $1.9 trillion American Rescue Plan, administration officials kicked off their response to the issue by claiming it wasn't happening

Biden officials are dismissing suggestions that the United States will likely see a burst of inflation later this year. 

The signs of looming inflation are all around us. Copper futures are now at a record high, joining many other industrial metals such as steel and aluminum that have also seen prices spike in recent months. These price hikes will soon drive up the cost of items that use these materials.

When they finally admitted inflation was in fact on the rise, officials claimed it was temporary and transitory. 

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Then, White House Chief of Staff Ron Klain called inflation a "high class problem."

But you can't say the Biden team wasn't warned.

Obama economic advisor Larry Summers told the administration to pump the brakes on spending in March 2021. 

"Bold measures need to be accompanied by careful consideration of risks and how they can be mitigated. While the arguments for providing relief to those hurt by the economic fallout of the pandemic, investing in controlling the virus and supporting consumer demand are compelling, much of the policy discussion has not fully reckoned with the magnitude of what is being debated," Summers explained in The Washington Post. "While there are enormous uncertainties, there is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability. This will be manageable if monetary and fiscal policy can be rapidly adjusted to address the problem. But given the commitments the Fed has made, administration officials’ dismissal of even the possibility of inflation, and the difficulties in mobilizing congressional support for tax increases or spending cuts, there is the risk of inflation expectations rising sharply."

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And now, Biden officials still don't have a plan. 

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