Yellen open to federal gas tax holiday as way to cut costs for motorists
REHOBOTH BEACH, Del. — Treasury Secretary Janet Yellen said Sunday that she expects the U.S. economy to slow in the months ahead, but that a recession is not inevitable.
Yellen offered a dose of optimism even as economists grow increasingly worried about a recession fueled by skyrocketing inflation and the Russian invasion of Ukraine.
She also expressed an openness, during an interview on ABC’s “This Week,” to a federal gas tax holiday to help give motorists some relief at the pump. Several lawmakers have floated the idea as the average price of gasoline hovers around $5 per gallon; the tax is 18.4 cents per gallon.
“That’s an idea that’s certainly worth considering,” Yellen said when asked if the administration is weighing it.
She added that President Joe Biden wants “to do anything he possibly can to help consumers.”
And Energy Secretary Jennifer Granholm said “it’s one of the tools,” but told CNN’s “State of the Union” that “part of the challenge with the gas tax, of course, is that it funds the roads.”
Yellen said overall consumer spending in the United States remains strong, while noting that spending patterns are changing, given the impact of rising food and energy prices. Yellen said household savings during the coronavirus pandemic will help sustain spending.
The national saving rate has fallen to about 6%, below pre-pandemic levels, after reaching 16.6% in 2020, the highest on record dating to 1948, and 12.7% in 2021.
“I expect the economy to slow,” Yellen said. “It’s been growing at a very rapid rate and the economy has recovered and we have achieved full employment. We expect a transition to steady and stable growth, but I don’t think a recession is at all inevitable.”
Yellen echoed Biden’s optimism in the face of economic headwinds. Biden made the case last week that U.S. is “in a stronger position than any nation in the world to overcome this inflation.”
Former Treasury Secretary Larry Summers disagreed with Biden and Yellen’s assessment. He told NBC’s “Meet the Press” that “the dominant probability would be that by the end of next year we would be seeing a recession in the American economy.”
The Federal Reserve on Wednesday approved its largest interest rate increase in nearly 30 years to stem a surge in inflation. The move raised the target federal funds rate by three-quarters of a percentage point to a range of between 1.5% and 1.75%