What’s Causing Inflation? Treasury Sec. Yellen Points to Semiconductor Shortage
“Insufficient capacity at home to build semiconductors” linked to significant portion of inflation, Yellen tells Cantwell in hearing
WASHINGTON, D.C. — Today, at a U.S. Senate Finance Committee hearing on the President’s Fiscal Year 2023 budget, Sen. Cantwell (D-WA) asked Treasury Secretary Janet Yellen about the importance of passing the United States Innovation and Competition Act (USICA) to combat the semiconductor chip shortage hurting American consumers.
During the hearing, Sen. Cantwell raised that American consumers are seeing massive increases in the price of used cars due to the national shortage of semiconductor chips.
“We have our trucking industry saying that they can't even ship built trucks, because they don't have the chips to put into the trucks. So every aspect of our economy is now more expensive, just because shipping costs are going up,” said Sen. Cantwell.
Sen. Cantwell then asked Secretary Yellen how passing USICA could help combat the automobile shortage.
“It is very important, I think, to pass USICA and to make the investments in semiconductors that will keep the United States in the lead in this critically important industry, and to make sure we have the capacity to produce advanced chips at home,” said Secretary Yellen. “I think this is a national security issue, as well as an economic issue and I think USICA is a very important bill that I would very much like to see passed.”
Secretary Yellen continued, “We found ourselves in an almost unimaginable situation where the pandemic resulted in such an explosion of demand for chips globally as people switched increasingly to digital work and communications that our auto factories found themselves unable to get chips. And so here you have something that's caused a significant piece of the inflation we face that really results from structural shifts induced by the pandemic and insufficient capacity at home to build semiconductors.”
Sen. Cantwell added, “Just to be clear, you’re saying the chip shortage has added to our inflation woes?”
Secretary Yellen replied, “Absolutely. Look, I believe for about a third of U.S. inflation is new and used cars and manufacturers have been forced to actually cut production of cars when they face absolutely record demand for those vehicles, and it is all due to a shortage of semiconductors.”
As Chair of the U.S. Senate Committee on Commerce, Science, and Transportation, Sen. Cantwell championed the Senate passage of USCIA in 2021, and again in 2022. The final bill is now being negotiated by a bipartisan conference of House and Senate members.
Sen. Cantwell has consistently fought for increasing domestic semiconductor manufacturing. In March, Sen. Cantwell led a Commerce Committee hearing on how the semiconductor shortage hurts American consumers, pointing to the soaring cost of used cars as buyers are forced to wait months for new cars.
According to Cars.com, used car prices rose by 45% between January 2021 and January 2022.
Sen. Cantwell previously spoke on the Senate floor to call attention to the alarming rise in used-car prices hurting American consumers: “The price increase for our consumers is 41% increase in the cost for a used car today…We're talking about real impacts that are happening in real people's lives today.”
The attached chart provided by the Washington Auto Dealers Association shows the average prices for used vehicles across Washington state from 2019-2022:
A Video of Senator Cantwell’s opening statement from the March 23rd Commerce hearing is HERE, transcript HERE. Video of Senator Cantwell’s Q&A with the hearing witnesses is available HERE, transcript HERE. Video of Senator Cantwell’s closing statement is available HERE, transcript HERE.
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