WASHINGTON: U.S. Treasury Secretary Janet Yellen said on Monday she will judge the success of President Joe Biden's coronavirus stimulus plan by how quickly it returns the economy to pre-pandemic levels of unemployment.
Speaking to a New York Times Dealbook online event, Yellen also played down the increased debt levels that would be incurred from Biden's US$1.9 trillion American Recovery Plan being debated in Congress. She said that due to low interest rates, U.S. interest expenses as a share of GDP are at 2007 levels.
The current U.S. unemployment rate is 6.3per cent, compared with 3.5per cent before the pandemic - a level widely viewed as effectively full employment. But Yellen said that because 4 million people have dropped out of the labor force because of child care responsibilities during the COVID-19 pandemic, the effective unemployment rate is close to 10per cent.
"Success to me would be if we could get back to pre-pandemic levels of unemployment and see the re-employment of those who have lost jobs in the service sector, particularly - I would also consider them a measure of success."
Yellen said that if the federal government fails to spend the money necessary to get the economy quickly back on track, that will take a toll on U.S. fiscal soundness, citing the long, slow recovery from the 2008-2009 financial crisis.
"So by having a stronger economy, the money that's spent partially pays for itself," Yellen said.
She said traditional metrics in assessing debt, such as the 100per cent U.S. debt-to-GDP ratio, are less relevant in a very low interest rate environment.
A "more important metric" was interest payments on federal debt as a share of GDP, which at around 2per cent is no higher than in 2007, when interest rates were substantially higher.
The Treasury is seeking to take advantage of those rates by issuing longer-term securities, Yellen said. Asked whether the Treasury would consider a 100-year bond, she said the market for that maturity would likely be "very tiny" with "limited interest."
(Reporting by David Lawder; Editing by Chizu Nomiyama and Mark Heinrich)