(Bloomberg) -- Inflation is a risk that bears watching, though the bigger danger now is longer-term damage to the labor market, the White House’s chief economic adviser said in addressing criticism of President Joe Biden’s $1.9 trillion aid plan.
“We take very seriously the economic risks that are out there, we spend a lot of time thinking about them, a lot of time worrying about them,” Brian Deese, director of the White House National Economic Council, said in a Bloomberg Television interview Monday. Inflation is “a risk that we’re keeping our eye on and it’s something to consider,” he said.
The potential for inflation to accelerate as household spending revs up, thanks in part to expected passage of the Biden spending package, has contributed to a sell-off in the bond market. Ten-year Treasury yields hit the highest since last February on Monday.
“As we assess and balance these risks, we believe that the risks of further scarring in the labor market -- the risks of further extending this economic pain -- outweigh the risks of doing too much” with relief spending, Deese said.
Deese insisted that the pandemic assistance bill is the right size, following Treasury Secretary Janet Yellen’s similar defense of the package last week. “We think that this is appropriately sized and frankly the right kind of economic prescription to what is a unique and precarious moment in our economy,” he said.
The Covid-19 crisis has been like a natural disaster in its impact on the economy, and needs a similar surge in federal help in response, Deese said in the interview, which was recorded for broadcast later. Last year’s approach -- when nine months passed between the $2 trillion Cares Act and the $900 billion relief plan -- showed that a “wait and see, and take incremental steps” strategy didn’t work, he said.
“If we look at recent history over the last couple of decades, we’ve seen that the economy has the capability of running at stronger paces and we think that the tools exist to manage those risks as we go forward,” Deese said.
The House is expected to vote on the aid bill as soon as Friday, with the Senate aiming to take it up potentially next week. Democratic congressional leaders want final passage of the legislation by March 14, when enhanced unemployment benefits from the December relief act begin to expire.
Deese said the next step is Biden’s longer-term economic rebuilding plan. He said outreach to businesses, labor representatives, Democrats and Republicans in recent weeks has shown there’s a “broad consensus” toward addressing infrastructure needs.
“Deferred maintenance challenges” such as those on display in the Texas power crisis this month “are real” and holding back the economy, Deese said.
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