With inflation at a 40-year high, a pandemic raging and war raging in Ukraine, a growing number of economists and CEOs say the US is headed for recession.
Treasury Secretary Janet Yellen, essentially the country’s chief financial officer, said she was doing everything she could to prevent it. Yellen is an economist with more than 50 years of experience and is the former chair of the Federal Reserve, the US central bank responsible for setting American interest rates. He knows better than anyone the delicate balance involved in trying to build an economy that keeps inflation down without causing large-scale layoffs and recession.
We wanted to find out what to expect in the new year, so we spent the past week with Secretary Yellen to get an update on the economy.
Norah O’Donnell: What will 2023 look like for the average consumer?
Janet Yellen: So I believe inflation will come down. I am very hopeful that the job market will remain healthy enough so that people can feel good about their financial and personal economic situation.
Norah O’Donnell: I mean, the American consumer has had this kind of inflation for decades.
Janet Yellen: Yes, and I hope it’s short-lived. We learned many lessons from the hyperinflation we experienced in the 1970s. And we all know that it is very important to keep inflation under control and not become endemic for our economy. And we are sure that will not happen.
Secretary Yellen said she sees positive signs on the horizon that many underlying causes are slowly being addressed.
Janet Yellen: First of all, transportation costs have come down. Too long delivery delays have been shortened.
Norah O’Donnell: Gas prices are down.
Janet Yellen: Gas prices are down a lot. I think we will see inflation come down significantly next year.
Norah O’Donnell: Will it take a year?
Janet Yellen: I believe that by the end of next year, you will see inflation significantly lower. if not — an unexpected shock.
Norah O’Donnell: But for families paying more at the grocery store, should we worry about a recession come 2023?
Janet Yellen: There are always downside risks. The economy remains prone to shocks. But look, we have a very healthy banking system. We have a very healthy job and household…
Norah O’Donnell: So you…
Janet Yellen: –sector.
Norah O’Donnell: You said that, you don’t believe there’s going to be a recession next year.
Janet Yellen: There is a risk of recession. But in my opinion, it is certainly not important to reduce inflation.
In recent weeks, Amazon, DoorDash, Meta, CBS News parent Paramount and Pepsi have all been laid off.
Norah O’Donnell: When I talk to business leaders, they say, “We’re getting ready for a recession.” So some said to me, “Ask the treasurer. What does he know that we don’t?”
Janet Yellen: Well, economic growth is slowing significantly. And businesses see it. Look, we recovered from the pandemic very quickly. Economic growth was very high. And there was an increase in hiring, they put people back to work. We put people back to work. We have closed this gap. We have a healthy labor market. To keep inflation down, and because almost everyone who wants a job has a job, growth must slow.
Norah O’Donnell: When you say growth should slow, it means hiring.
Janet Yellen: We are at or beyond full employment. So the economy doesn’t have to grow as fast as it did to get people back to work.
Janet Yellen has spent her career in economics getting people to work. As head of the San Francisco Federal Reserve in 2009, in the midst of the Great Recession, he gave his employees memorable marching orders.
Janet Yellen: I tried to remind them that there are real people behind the statistics that we’re looking at, and we really should be concerned about their well-being.
Norah O’Donnell: Thousands of people were being laid off. You tried to remind everyone that this is not about statistics. Is that right?
Janet Yellen: I think I said, “They’re awesome people.” And I wanted the people who work for me to take seriously the hurt and misery that so many Americans are experiencing.
Norah O’Donnell: I mean, how does that affect how you define your politics, how you operate here?
Janet Yellen: It’s important to understand that people are really suffering, and I’m trying to make sure everyone remembers that we’re running programs that affect people’s lives. And we must do so with compassion and a sense of urgency.
Secretary Yellen told us that outside of the US economy, the topic on which she spends most of her time is the war in Ukraine. Apart from the stars and stripes, the only national flag we saw in the treasury halls was the blue and yellow colors of Ukraine.
Norah O’Donnell: You’ve said that ending Russia’s war on Ukraine is the single best thing we can do for the global economy.
Janet Yellen: Yes.
Norah O’Donnell: Do you see any evidence that this end is in sight?
Janet Yellen: We are doing everything we can to end this war. Of course, we provide both military and economic assistance to Ukraine.
The agency responsible for imposing more than 1,000 sanctions against Russia’s banking, energy and military industries is the Treasury, not the State Department or the Pentagon. Yellen has tasked 41-year-old Deputy Secretary of State Wally Adeyemo with collapsing the Russian economy and stripping the Russian military of what it needs to fight.
Much of the financial war against Russia is being waged behind closed doors at the Treasury in rooms called secure compartmentalized information facilities, or “SCIFs.”
Norah O’Donnell: And what about some of the things you can do in this safe room that will limit Russia’s ability in Ukraine?
Wally Adeyemo: We can look at intelligence on Russian attempts to evade our sanctions. We also see intelligence on what Russia needs to continue its war in Ukraine.
Norah O’Donnell: And how much time do you spend at SCIF?
Wally Adeyemo: So I’ll spend hours every day at SCIF –
Norah O’Donnell: The hour? An hour a day?
Wally Adeyemo: Yes, the secretary and I will have several meetings there a week with the team to review our progress on a number of issues.
The deputy secretary told us that limiting Russia’s supply of everything from microchips to ball bearings has made a difference on the battlefield.
Norah O’Donnell: Take me behind the scenes on how you know the sanctions you and other countries are imposing are really working
Wally Adeyemo: I’m not going to tell you about any intelligence I’ve seen. But I can tell you that Russia’s largest tank manufacturers have shut down their operations, and they’ve made it public because they can’t get the equipment they need.
U.S. and allied sanctions have taken a toll on Russia’s military, but CBS News has learned that several of the cruise missiles fired by Russia during its Nov. 23 attacks on Ukraine’s capital, Kiev, were made in Russia several weeks ago.
Norah O’Donnell: Does that suggest that Russia is evading some of these sanctions that you’re developing right here at the Treasury Department?
Janet Yellen: So I don’t know the details of these missiles. I would say that Russia’s ability to equip its own military has been greatly impaired by sanctions and export controls.
Starting last week, the G7, which includes the United States and the European Union, plus Australia, agreed to raise the price of Russian oil to $60 per barrel.
The elaborate plan, eight months in the making, has come together with Europe’s ban on Russian oil imports, raising fears of a price hike that will hit a continent already suffering from high energy prices.
Norah O’Donnell: What does this price cap do to Russian oil? What is the purpose?
Janet Yellen: The first goal is to limit Russian income. And we want to make sure they don’t get a windfall. But the second goal is the one that interests the Americans and all the countries of the world, and we want to keep the Russian oil flowing, because Russia is a significant supplier of oil to the markets. So our two goals are: squeeze Russian revenues, make it harder for them to fight the war, keep global prices in a moderate range, and avoid spikes.
Norah O’Donnell: It’s a very delicate balance.
Janet Yellen: It is. it is new. The price cap only came into effect earlier this week. But so far I’d say so good.
Norah O’Donnell: The American people have allocated $38 billion in military aid to Ukraine and an additional $13 billion in direct aid to support the Ukrainian economy.
Janet Yellen: As long as it takes.
The US Treasury was created to finance another war, the war of independence against Great Britain, before the US even existed. It is the oldest department building in Washington, making history as the 78th Secretary Janet Yellen.
Janet Yellen: (LAUGHS) I’m the first lady.
Norah O’Donnell: Ah. So this is your office.
Janet Yellen: This is my office.
Yellen enjoys a personal connection with another Treasury secretary who once made history.
Janet Yellen: This is another portrait of Hamilton.
Norah O’Donnell: You actually went to Hamilton High School in Brooklyn…
Janet Yellen: I did… I went to Fort Hamilton High School. Of course, it was named after Hamilton.
Norah O’Donnell: And have you ever thought, “I’m going to follow in his footsteps?”
Janet Yellen: I never, of course, thought about it at the time. I never knew that I would study economics.
He was born in Bay Ridge, Brooklyn. After graduating from Brown University, the secretary earned a PhD in economics from Yale in 1971. She was the only female in her class. The notes he kept as a teaching assistant are passed down by graduate students to this day.
More than half a century later, last Thursday, we followed Secretary Yellen to Fort Worth, Texas, to see the first dollar bills bearing her signature go into production.
Janet Yellen: Oh my God. Oh, that’s fantastic. This is beautiful. I’m so excited, it’s great.
This Bureau of Engraving and Printing is part of the Treasury and is one of only two sites in the country that prints American currency. Currently, there is 2 trillion dollars of money in circulation around the world, most of it is printed here.
The event marked the first time in the country’s nearly 250-year history that two signatures on the dollar – US Treasurer Lynne Malerba and Treasury Secretary Janet Yellen – were both signed by women.
Janet Yellen: I wish my parents were alive to see this. I think they will find it very interesting.
Norah O’Donnell: You’ve had a lot of firsts. The first female head of the Fed, the first female head of the US Treasury. Now what does it mean to see your name on these dollar bills?
Janet Yellen: I’m very proud of that, but you know, our currency is really about our values and how we feel about ourselves as a nation. And they represent a healthy economy, a strong financial system, and a country that can actually produce a currency that is the standard around the world.
Produced by Keith Sharman. Associate Producer, Roxanne Feitel. Broadcast partners, Eliza Costas and Olivia Rinaldi. Edited by Warren Lustig.