STEVE INSKEEP, HOST:
Our next guest is facing one of the world's most complicated economic problems. The United States wants to cut off oil money to Russia because it invaded Ukraine. The United States does not want to cut off Russian oil from the global market. The disruptions of the war have already added to the prices that Americans are paying for gas. So we got on the line with the person President Biden wants to address this - Treasury Secretary Janet Yellen.
JANET YELLEN: If that much Russian oil is subtracted from global oil supply, oil prices could easily spike to a hundred and forty dollars or more...
INSKEEP: So what do you do?
YELLEN: ...Per barrel. We want to keep it being sold, but we want to ensure that Russia doesn't make undue profit.
INSKEEP: Janet Yellen is working on an international agreement to choke off much of the Russian profit, even as the oil flows. It's one of several global issues she is negotiating and which we discussed as she travels the world. She's in South Korea. Here's how the United States hopes to force down the price of Russian oil. European insurance firms are about to stop insuring tankers that carry Russian oil. That would completely block many Russian exports, unless Russia sells the oil cheap.
YELLEN: We're calling this a price exception, that the EU and U.K. will be willing to allow their companies to provide insurance and to provide trade finance and other services as long as the buyers certify that they've paid less than the capped price.
INSKEEP: Ah, I see. So you have leverage. You have leverage there. You won't allow the oil to move unless it is at that lower price. I understand now.
YELLEN: That's right. That's the enforcement mechanism.
INSKEEP: Madam Secretary, I want people to know that even as you've been trying to negotiate that, you've also been negotiating with leaders of other nations to push for a global minimum corporate tax so that companies can't shop for lower rates around the world. And you've persuaded a lot of other countries to sign on. But the U.S...
YELLEN: A hundred and thirty-seven.
INSKEEP: A hundred and thirty-seven - you're counting, of course. The U.S. Congress, however, has not signed on yet. And Senator Joe Manchin, Democrat of West Virginia, said he doesn't favor this, which would seem to leave you short of votes, would seem to block the United States itself from signing on. What do you do now?
YELLEN: Well, this is really an important initiative. It's a way of closing loopholes that corporations have used to shift profits and business and jobs overseas. What the consequence of that process has been is that the amount of corporate tax that all countries receive has declined substantially. Corporations have benefited. The burden of taxation has shifted to workers. So we've got a hundred and thirty-seven countries that have agreed to hold hands, say enough is enough and we're going to establish minimum below which we won't cut corporate taxes.
Now, we, at the moment, are the only country that has a global minimum tax. It's 10 1/2 percent. We need to raise it to 15 to come into compliance. We will continue to pursue legislation that will bring us into compliance. This is too important to say that we're not going to go back and try to get this done. And I would say that over time, as other countries do adopt a minimum, that will create an incentive for our Congress to pursue legislation that will put us in compliance.
INSKEEP: Ah, so this might be - so you're - I think you're saying this might be a years-long struggle, then, to get the U.S. Congress into line.
YELLEN: It's conceivable. I hope not. I hope that we will be able to pass this sooner and to take a leadership role as other countries come into compliance. They will levy this tax on American companies doing business in their jurisdictions, and America will just lose out on tax revenues that we could use to invest in the strength of our economy in the middle class. So there will be incentives over time to adopt this in the United States.
INSKEEP: Madam Secretary, I have to ask about inflation - 9.1% now in the United States.
INSKEEP: And, of course, it's harder for some people to absorb than others. I was just speaking with an expert on rural households in Iowa. Of course, people have to drive farther. They're paying higher gas prices. They have higher home fuel prices and also lower incomes, generally. And they've been losing money, draining their bank accounts, month by month. How soon will they have relief?
YELLEN: Well, I know inflation is a substantial burden to every American household, and especially the kind of household that you describe. So getting inflation down is President Biden's top priority. You know, the price cap that we're pursuing is one of the most important ways we can make sure price - we don't suffer from further increases in energy prices that would harm American households. And, of course, the Fed is taking action to bring inflation down.
INSKEEP: Of course, you mentioned the Fed raising interest rates. That slows down the economy. How do you rate the risk of a U.S. recession in the next year?
YELLEN: Well, right now, the labor market is certainly what I would characterize as full employment. Jobs are plentiful. People feel secure about their employment prospects. And the labor market is very tight. Just in the last three months, our economy has created an average of around 400,000 jobs. A recession is a broad contraction of the economy, and that just isn't consistent with the kind of labor market that we're seeing. Consumer spending has also continued to grow. Retail sales are well above their pre-pandemic trend, and industrial production has risen in 4 of the first 5 months of 2022. So this is not a set of economic conditions that constitutes a recession. That - you know, that said...
INSKEEP: But I mean in the next year - my question is whether that could change in six months or nine months.
YELLEN: Well, we expected to see growth slow, and I think we are seeing that it's appropriate now that we have closed the shortfall that existed because of the pandemic. You know, the Fed will want to achieve a kind of soft landing. That's something that will require skill and good luck. I'm hopeful that that's achievable. But, you know, let's be clear-eyed. There are risks that our economy faces - the war in Ukraine, global developments could further raise food and energy prices, commodity prices. We're seeing a slowdown in China. There are global risks, and those do pose risk to our economy.
INSKEEP: Treasury Secretary Janet Yellen, it's a pleasure talking with you. Safe travels.
YELLEN: Thanks so much.
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