Yellen embarks on economic victory tour

DEARBORN, Mich. – Emerging from months of inflation and recession fears, the Biden administration is pivoting to recast its stewardship of the U.S. economy as a singular achievement. In their pitch to voters, two months before midterm elections that will determine whether Democrats maintain full control of Washington, Biden officials are pointing to a post-pandemic resurgence of factories and “forgotten” cities.

The case was reinforced Thursday by Treasury Secretary Janet Yellen, who laid out the trajectory of President Joe Biden’s economic agenda on the floor of Ford Motor’s electric vehicle manufacturing facility. Surrounded by F-150 Lightning trucks, Yellen described an economy in which new infrastructure investments would soon make it easier to produce and move goods around the country, bringing prosperity to places that have been left behind.

“We know that a disproportionate share of economic opportunity has been concentrated in major coastal cities,” Yellen said in a speech. “Investments from the Biden economic plan have already begun shifting this dynamic.”

Yellen’s comments come at time when the U.S. economy is at a crossroads. Some metrics suggest that a run of the highest levels of inflation in four decades has peaked, but recession fears still loom as the Federal Reserve continues to raise interest rates to contain rising prices. The price of gasoline has been easing in recent weeks, but a European Union embargo on Russian oil that is expected to take effect in December could send prices soaring again, rattling the global economy. Lockdowns in China in response to virus outbreaks continue to weigh on the world’s second-largest economy.

In her speech Thursday, Yellen said the legislation that Biden signed this year to promote infrastructure investment, expand the domestic semiconductor industry and support the transition to electric vehicles represented what she called “modern supply-side economics.” Rather than relying on tax cuts and deregulation to spur economic growth, as Republicans espouse, Yellen contends that investments that make it easier to produce products in the United States will lead to a more broad-based and stable economic expansion. She argued that an expansion of clean energy initiatives was also a matter of national security.

“It will put us well on our way toward a future where we depend on the wind, sun and other clean sources for our energy,” Yellen said as Ford’s most cutting-edge electric pickup trucks were assembled around her. “We will rid ourselves from our current dependence on fossil fuels and the whims of autocrats like Putin,” she said, referring to President Vladimir Putin of Russia.

The remarks are the first of several that top Biden administration officials and the president are planning to make this month as midterm election campaigns around the country enter their final stretch. After months of being on the defensive in the face of criticism from Republicans who say that Democrats fueled inflation by overstimulating the economy, the Biden administration is fully embracing the fruits of initiatives such as the $1.9 trillion American Rescue Plan of 2021, which disbursed $350 billion to states and cities.

At the Ford factory Thursday, Yellen met with some of the company’s top engineers and executives. During her trip to Michigan, Yellen also made stops in Detroit at an East African restaurant, an apparel manufacturer and a coffee shop that received federal stimulus funds. She dined with Detroit Mayor Mike Duggan and Michigan’s lieutenant governor, Garlin Gilchrist. Detroit was awarded $827 million through the relief package and has been spending the money on projects to clean up blighted neighborhoods, expand broadband access and upgrade parks and recreation venues.

Although Yellen is helping to lead what Treasury officials described as a victory lap, some of her top priorities have yet to be addressed.

The so-called Inflation Reduction Act that Congress passed last month did not contain provisions to put the United States in compliance with the global tax agreement that Yellen brokered last year, which aimed to eliminate corporate tax havens, leaving the deal in limbo.

On Thursday, she said that she would continue to “advocate for additional reforms of our tax code and the global tax system.”

Despite Yellen’s belief that some of the tariffs that the Trump administration imposed on Chinese imports were not strategic and should be removed, Biden has yet to roll them back. In her speech, Yellen accused China of unfairly using its market advantages as leverage against other countries but said that maintaining “mutually beneficial trade” was important.

Yellen also made no mention in her speech of Biden’s recent decision to cancel student loan debt for millions of Americans. She believed the policy, which budget analysts estimate could cost the federal government $300 billion, could fuel inflation.

Treasury Department officials said that Detroit, the center of the U.S.’ automobile industry, exemplified many elements of the Biden administration’s economic agenda coming together to benefit a place that epitomized the economic carnage of the 2008 financial crisis. Legislation that Democrats passed this year is meant to create new incentives for the purchase of electric vehicles, improve access to microchips that are critical for car manufacturing and smooth out supply chains that have been disrupted during the pandemic.

“There will be greater certainty in our increasingly technology-dependent economy,” Yellen said.

But the transition to a post-pandemic economy has had its share of turbulence.

Ford said last month that it was cutting 3,000 jobs as part of an effort to reduce costs and become more competitive amid the auto sector’s evolution to electric vehicles. The company also cut nearly 300 workers in April.

“People in Michigan can be pretty nervous about the transition to electric vehicles because they actually require by some estimation a lot less labor to assemble because there are fewer parts,” said Gabriel Ehrlich, an economist at the University of Michigan. “There are questions about what does that mean for these jobs.”

(STORY CAN END HERE. OPTIONAL MATERIAL FOLLOWS.)

Republicans in Congress continue to assail the Biden administration’s management of the economy.

“Inflation continues to sit at a 40-year high, eating away at paychecks and sending costs through the roof,” Rep. Tim Walberg, R-Mich., said on Twitter Thursday. “While in Michigan today, Secretary Yellen should apologize for being so wrong about the inflation-fueling impact of the Biden administration’s runaway spending.”

Yellen’s trip to Michigan will be followed next week by a visit by Biden, who will attend Detroit’s annual auto show.

The business community in Detroit, noting the magnetism of Michigan’s swing state status, welcomed the attention.

“We’re about as purple as it gets right now,” said Sandy K. Baruah, CEO of the Detroit Regional Chamber, a business group.

Noting the importance of the automobile industry to America’s economy, Baruah added, “When you think about blue-collar jobs and the transitioning nature of blue-collar jobs, especially in the manufacturing space, Michigan has the perfect optics.”