Yellen tries to preempt inflation data, GOP-pushed analysis of Biden’s social spending bill

In a memo issued Thursday night, Treasury Secretary Janet Yellen urged lawmakers not to be spooked by new inflation numbers and a pending analysis of President Joe Biden’s social spending bill set to be released tomorrow.

The memo, titled “Fiscal Responsibility and the Build Back Better Act,” was sent to the Senate and obtained by POLITICO. In it, Yellen delivered a prebuttal to two government reports that could impact key senators’ support for the social spending plan serving as a centerpiece of Biden’s economic agenda. The first of those reports is the consumer price index (CPI) for November, which is expected to show a rise in inflation. The second is the Congressional Budget Office, which is looking at the longer-term monetary impact of the Build Back Better plan, if the programs in it were not set to expire, as they currently are under the legislative language.

Yellen writes that because Biden has promised to pay for any prospective extension of programs under the current version of the BBB bill, “it is inappropriate to judge this legislation based on an assumption that future acts of Congress won’t be paid for.” Republicans lawmakers have requested that specific CBO score as a means of producing an alternate, higher cost associated with the social spending plan, which would extend the enhanced child tax credit but only for a year, in addition to expanding health care coverage and combating climate change.

“Tomorrow, the Congressional Budget Office is expected to release its analysis,” Yellen wrote. “To be clear, this should not be confused with a score of the Build Back Better Act, which was already released. Instead, this analysis is of a bill that the House did not pass, the Senate is not considering, and the President – who has committed to paying for permanent investment – would not sign.”

Yellen also said of inflation concerns that “the modest near-term net deficit impact should not lead to economic overheating.” She pointed to the CBO score released in November that found the bill’s aggregate costs would offset over the next decade.

“In the later part of the decade, as confirmed by the CBO score, the legislation will be deficit-reducing on an annual basis, and thus cannot be expected to contribute to inflation in those years,” Yellen wrote.

Yellen is sending the memo as the administration works towards Senate passage of a revised Build Back Better bill, said a Treasury source. In the letter, Yellen hammers home that Biden has long said he would pay for “long-term policies” and that that commitment “applies equally to extensions of temporary policies now in the Build Back Better Act and looking ahead.”

Yellen’s note to senators comes as four Senate committees released legislative text and CBO scores pertaining to the BBB bill on Thursday, with more text and revisions expected in the coming days.

The memo comes just days after centrist Sen. Joe Manchin (D-W.Va.) again expressed reluctance about supporting the bill, citing inflation.

“The unknown we’re facing today is much greater than the need that people believe in this aspirational bill that we’re looking at and we’ve got to make sure we get this right,” Manchin said at a Wall Street Journal CEO Council Summit.

In recent weeks, the White House has stepped up its defense of Biden’s bill and has tried to stay ahead of inflation fears. The administration has also increased its attacks on Republicans for blaming Biden for rising costs of gasoline and consumer goods, arguing that the GOP is offering little if any solutions of their own, and arguing that the social spending plan will help Americans with some of their major costs, mainly around childcare.

In a move to set expectations ahead of Friday’s inflation report, Biden issued a statement citing a drop in natural gas prices and a decline in used car prices, which he said “should translate into lower prices for Americans in the months ahead.”

“The information being released tomorrow on energy in November does not reflect today’s reality, and it does not reflect the expected price decreases in the weeks and months ahead, such as in the auto market,” Biden said, adding that his Build Back Better plan would help “address elevated prices and to lower costs for American families.”

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