Treasury Secretary Yellen, after years of denying or ducking the issue, is conceding that President Biden’s Covid-19 stimulus package contributed to the soaring prices of the past four years but insists its impact was minimal.

In an interview with CNBC’s “Money Movers” Wednesday, Ms. Yellen insisted the surge in prices was caused primarily by the Covid pandemic. She said “huge supply chain problems” that left Americans struggling to find basic goods in stores are what “started pushing prices up a great deal.”

She also said Mr. Biden’s $1.9 trillion Covid relief spending contributed to inflation “a little bit.” However, she defended the spending package, which came on the heels of President Trump’s two stimulus packages, because the virus was “raging out of control.”

“It was really important to spend the money to alleviate that suffering,” she said.

When Mr. Biden signed his stimulus package, the American Rescue Plan, inflation clocked in at 1.7 percent. In the subsequent years, the pace of price increases surged to a four-decade high of 9.1 percent, before settling back down to the current rate of around 2.7 percent. Ms. Yellen did not address the suffering that was caused by inflation.

Economists have attributed the increase in prices to multiple factors, such as the supply chain crisis and Russia’s invasion of Ukraine. They also point to Mr. Biden’s Covid relief measures as another reason for inflation. A 2022 study from the Federal Reserve Bank of San Francisco estimated that the Covid relief efforts added about three percent to the rate of inflation. 

The main cause of inflation, though, was excessive spending across the board by the Biden administration. An economist and columnist for The New York Sun, Lawrence Kudlow, pointed out in January 2024 that the “sum-total” of federal spending had surpassed America’s GDP. He said the disparity between the federal spending, “which stimulates demand,” is not being met by supply, leading to inflation.

Ms. Yellen also tried to defend Mr. Biden’s record on the deficit, which surpassed $1.8 trillion in the 2024 fiscal year. “Interest rate increases have led to higher costs of servicing the outstanding debt. That’s one factor that’s been involved,” she said.

The Federal Reserve is expected to keep interest rates steady. In minutes of the Fed’s December meeting released Wednesday, officials said they believe inflation will fall below the target rate of two percent. However, they estimated that it “could take longer than previously anticipated.”

The officials in the notes pointed to anticipated changes in immigration and trade policy after Trump takes office as factors that could delay the dip in inflation. The Wall Street Journal notes Fed officials were not “sure whether somewhat firmer inflation readings last fall suggest more latent price pressures remain in the economy.” Members of the Fed also tried to project how Trump’s threats to impose new tariffs could impact inflation. However, the minutes said that “all participants judged that upside risks to the inflation outlook had increased.”

When Mr. Biden first took office, the deficit sat at $2.3 trillion, according to the Congressional Budget Office, but that was partially seen as a result of the Covid spending and was projected to decrease to around $900 billion. Instead, by 2024, it was roughly double that projection. 

The federal government’s debt also surged past $28 trillion in the most recent reports, up $6 trillion from when Mr. Biden first took office. 

While Ms. Yellen defended the 46th president’s Covid spending, she has previously warned about America’s “fiscal sustainability.” During a discussion at the Wall Street Journal’s chief executives’ summit last month, she said, “I am concerned about fiscal sustainability, and I am sorry that we haven’t made more progress. I believe that the deficit needs to be brought down, especially now that we’re in an environment of higher interest rates.”

And in her interview with CNBC, she poured cold water on the idea that Trump’s new advisory board, the Department of Government Efficiency, would be able to cut federal spending. 

“It’s hard to see how the math on that works,” she said. “Many feel that defense spending should go up.” She also stated that cuts to programs such as Social Security or Medicaid and Medicare would be unpopular and added, “It’s hard to see how you could solve the deficit that way.”

Elon Musk and Vivek Ramaswamy, who have been tasked with running DOGE, have expressed optimism they can find ways to cut $2 trillion from the federal government’s spending to put America on a more sustainable fiscal path. 

While observers have suggested it would be a difficult feat to accomplish, budget analysts and lawmakers have been busy offering Mr. Musk and Mr. Ramaswamy ideas of various programs that could be cut. 

In November, an organization focused on addressing the federal deficit and sound fiscal policy, the Committee for a Responsible Federal Budget, suggested roughly $1.4 trillion in federal spending could be cut simply by rescinding several of Mr. Biden’s executive orders.