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Yellen Says She Never Urged Smaller Rescue Package Over Inflation Concerns

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Yellen Says She Never Urged Smaller Rescue Package Over Inflation Concerns

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WASHINGTON—Treasury Secretary

Janet Yellen

denied that she tried to decrease the size of the $1.9 trillion rescue package Democrats approved in early 2021, defending legislation that is now a focus of debate about the causes of currently high inflation.

Ms. Yellen’s statement Saturday comes after Bloomberg News reported that a forthcoming biography about Ms. Yellen states that she had sought to lower the amount of spending in the legislation. In the book, titled “Empathy Economics,” author Owen Ullmann writes that Ms. Yellen harbored concerns that a $1.9 trillion package could fuel inflation, instead preferring a $1.3 trillion bill, according to excerpts of a pre-publication version of the book viewed by The Wall Street Journal.

Her concern about inflation is “why she had sought without success to scale back the $1.9 trillion relief plan by a third early in 2021 before Congress passed the enormous program,” Mr. Ullmann writes in the excerpts.

The publisher, PublicAffairs, a division of Hachette Book Group, said Mr. Ullmann wouldn’t comment beyond the excerpts.

In her statement, Ms. Yellen said she never tried to reduce the spending in the bill, called the American Rescue Plan, or ARP.

“I never urged adoption of a smaller American Rescue Plan package, and I believe that ARP played a central role in driving strong growth throughout 2021 and afterwards, with the United States real GDP growth outpacing other advanced economies and our labor market recovering faster relative to historical experience,” she said.

Ms. Yellen became comfortable with the size of the bill as she embraced the calculation that providing too much fiscal support to the economy would be better than offering too little, according to the excerpts viewed by the Journal.

Inflation, which has been trending above 8% at a four-decade high, has become a central political and economic challenge for the Biden administration ahead of the November midterm elections. Republicans argue that the spending in the $1.9 trillion bill is a primary driver of inflation, blaming Democrats for rising prices across the economy. Democrats, meanwhile, emphasize the role that supply-chain disruptions and higher energy and fuel prices caused by the war in Ukraine have played in raising costs.

The White House has embarked on an effort in the past week to try to improve Americans’ views of the economy, which rapidly recovered from the brief recession caused by Covid-19. Senior White House advisers have expressed frustration in recent weeks with their messaging around inflation, according to people familiar with the matter. Some officials have said they should publicly accept that the administration’s stimulus contributed to higher prices while arguing that such steps were worthwhile, though others have opposed making such concessions.

In previous public statements, Ms. Yellen has said that the broad fiscal support during the pandemic helped fuel demand, which, along with tighter supply, has led to inflation. She recently said her expectations in 2021 that inflation would quickly dissipate were wrong.

“High inflation is now the Administration’s top economic priority. We are committed to addressing it by respecting the independence of the Federal Reserve and giving them the space to act,” she said in the Saturday statement. She said the administration is seeking to reduce supply-chain issues and urging Congress to pass legislation to lower the cost of prescription drugs.

Write to Andrew Duehren at andrew.duehren@wsj.com

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