Janet Yellen Warns on Cutting Stimulus as Democrats Plan Vast Jobs, Infrastructure Package

Treasury Secretary Janet Yellen on Thursday defended the size of the $1.9 trillion stimulus package in the face of healthier than expected economic growth.

Her comments came as reports emerged that discussions are underway in the White House about putting together another larger economic stimulus package, which could amount to $3 trillion, according to The Washington Post.

Speaking to Sara Eisen on CNBC's Closing Bill, Yellen dismissed the suggestion that an unexpectedly strong start to 2021, with retail jumping 5.6 percent according to the Commerce Department, meant the size of the stimulus package was unnecessary.

"We think it's very important to have a big package [that] addresses the pain this has caused – 15 million Americans behind on their rent, 24 million adults and 12 million children who don't have enough to eat, small businesses failing," she said.

"I think the price of doing too little is much higher than the price of doing something big. We think that the benefits will far outweigh the costs in the longer run."

Yellen addressed fears that the stimulus package could lead to inflation.

"Inflation has been very low for over a decade, and you know it's a risk, but it's a risk that the Federal Reserve and others have tools to address," she said.

"The greater risk is of scarring the people, having this pandemic take a permanent lifelong toll on their lives and livelihoods."

Despite other positive economic indicators, such as the Atlanta Federal Reserve's GDPNow tracker pointing to growth of 9.5 percent in the first quarter, around 10 million Americans remain out of work.

In part to help these people, and others who are still working but struggling, President Joe Biden hopes to send $1,400 checks out to millions of Americans as part of the COVID-relief proposals.

"You know, there's so much pain in this economy," Yellen said. "I think these checks really will provide relief and they'll help jump-start our economy, giving people money to spend when we can get out again and go back to our former lives.

"So you know, there're a lot of families that are operating on the margin. And I think these checks will really help them."

Senior Democrats are meanwhile discussing a second new package that could total as much as $3 trillion in spending, per the Post, with a focus on creating jobs and delivering new infrastructure across the U.S.

Biden discussed the possible second raft of spending, along with the current COVID-relief bill, at a White House meeting with union bosses on Wednesday.

"We are so far behind the curve," he said at the meeting. "We rank like 38th in the world in terms of infrastructure, everything from canals to highways to airports, to everything we can do and we need to do to make ourselves competitive in the 21st Century."

White House Press Secretary Jen Psaki said on Wednesday that Biden's plan "will make historic investments in infrastructure—in the auto industry, in transit, in the power sector—creating millions of good union jobs, and in the process, also addressing the climate crisis head-on."

It's unclear when the package will be officially unveiled. Any spending approved by Congress in the COVID-relief package, and any second package, will be in addition to the $4 trillion in stimulus spending under former president Donald Trump.

The Congressional Budget Office projects a $2.3 trillion budget deficit in the fiscal year of 2021 even before all the additional stimulus spending.

President Joe Biden and Secretary Janet Yellen
Secretary of the Treasury, Janet Yellen looks on as President Joe Biden meets with business leaders about the critical need for the American Rescue Plan in the Oval Office at the White House in Washington, D.C., on Tuesday, Feb. 9, 2021. Yellen said a large stimulus package is still necessary despite a strong performance from the economy so far this year. Pete Marovich/Getty