Federal Reserve Chair Janet Yellen made it clear in congressional testimony that the national debt is on an unsustainable path that policymakers must address.
In response to a question during her testimony before the Committee on Financial Services of the U.S. House of Representatives on Wednesday, she strongly warned that changes are needed to put the country on a better course.
Let me state in the strongest possible terms: I agree that what you're showing here represents a trend that, given current spending and taxation decisions, is going to lead to an unsustainable debt situation, with rising interest rates and declining investment in the United States that will further harm productivity growth and living standards. I believe a key thing that Congress should be taking into account when designing fiscal policy is the need to achieve sustainability of this debt path over time.
Her advice is timely as Congress is debating the federal budget and government spending for the coming year and is looking to tackle tax reform soon.
Chairwoman Yellen also indicated that more interest rate hikes are on the horizon. Combined with rising debt, higher interest rates will mean considerably higher interest payments to service the debt. In fact, interest on the debt will be the fastest growing part of the budget and is expected to triple over the next decade. This, in turn, will crowd out more productive uses of taxpayer dollars that could benefit the economy and improve standard of living. See our infographic.
An unsustainable debt path and higher interest rates mean it’s time to fix the debt.
National Debt and You