Treasury Secretary Janet Yellen defended President Joe Biden’s budget on Friday in her first appearance before the House for the first time since Republicans took control.
Yellen provided testimony to the House Ways and Means Committee, which is now led by Chairman Jason Smith (R-MO). The visit to Congress comes only a day after Biden released his annual budget, a massive tax-and-spending package that includes $6.9 trillion in spending for fiscal 2024 and would result in total deficits of $17 trillion over the coming decade.
Yellen used her time to defend different provisions in the budget proposal, which was heavily panned by Republicans. She also fielded questions about Biden’s overall economic agenda.
“Our proposed budget builds on our economic progress by making smart, fiscally responsible investments,” she said. “These investments would be more than fully paid for by requiring corporations and the wealthiest to pay their fair share. Fiscal discipline remains a central priority in our budget.”
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Yellen noted that the Biden plan does lower deficits by about $3 trillion over the next decade, although Republicans contend that is only a drop in the bucket given how much debt the United States has already incurred and is set to take on in the coming years.
Smith trashed Biden’s budget on Friday and highlighted the aggressive increase in taxes that the president is calling for.
“After two years of economic failures, the American people desperately want results. The budget before us today calls for $4.7 trillion in new taxes and $6.9 trillion in new spending during a staggering debt crisis,” he said.
The budget proposal would raise the top marginal tax rate on those making over $400,000 per year to 39.6% — the rate it was before the Trump tax cuts, up from the current 37% rate. In addition, the budget raises the capital gains tax on those earning over $1 million from 20% to 39.6%.
Biden also proposed raising the corporate tax rate from 21% to 28% and pitched a 25% minimum tax on the wealthiest people in America, a tax that would only apply to those in the 0.01% of the highest earners.
Yellen was also questioned about the influx in IRS funding that was approved last year as part of the Inflation Reduction Act. While Democrats contend that it is a much-needed investment that will help close the tax gap and recoup lost revenue, Republicans argue that it could end up increasing audits on the middle class.
Republicans also seized on the fact that, on top of that funding increase, the Biden budget would hand over even more money to the agency, which has courted controversy recently with the leak of hundreds of pages of taxpayer information about the wealthiest Americans. Smith told Yellen that the IRS needs to address its “trust gap.”
“After Democrats handed the IRS an $80 billion raise last year, taxpayers are now asked in this budget to hand the IRS another $43.2 billion? I have to ask: Is this a joke?” Smith said.
Yellen has already publicly committed to stopping a surge in small-business audits and audits for those earning below $400,000 and on Friday told lawmakers questioning her on the matter that she promises and ensures that the mandate will be met.
Yellen was also questioned about inflation, which is running well above the Federal Reserve's target and hurting household purchasing power. Rep. Jodey Arrington touched on fiscal and monetary policy and, with the American Rescue Plan, the 2021 Democratic relief bill, in mind, asked whether she thinks spending contributes to inflation.
“I believe that was critically important support to make sure we didn’t end up with a scarred labor force at a time when the risk was we could see a serious —” Yellen said before being cut off by Arrington, who then pushed for a simple yes or no answer.
Arrington went on to note the bevy of extra spending that Biden inserted into the budget and said it’s “insulting” that the budget is “more of the same.”
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Biden’s budget is largely aspirational because most of Biden’s proposals will have no chance of getting passed into law given that Republicans hold the House and that Democrats have only a small majority in the Senate.