U.S. Treasury Secretary Janet Yellen testifies during a Senate Appropriations Financial Services and General Government Subcommittee hearing on President Biden’s proposed budget request for the Treasury Department at Capitol Hill, Washington, U.S., June 4, 2024.
Anna Roseladen | Reuters
U.S. Treasury Secretary Janet Yellen said Thursday that the ballooning national debt can be contained as long as it remains relatively low relative to the rest of the economy.
Yellen also pointed out in an interview with CNBC that high interest rates are adding to the burden as the United States manages a huge debt burden of $34.7 trillion.
“If debt stabilizes relative to the size of the economy, we’re in a reasonable position,” she told CNBC’s Andrew Ross Sorkin in a live interview on “Squawk Box.” “My view is that we should be looking at the real interest cost of the debt. That’s the real burden.”
Net interest costs on debt totaled $601 billion in fiscal 2024, more than the government spends on health care or defense and more than four times what it spends on education.
Multiple reports from the Congressional Budget Office have warned of soaring debt and deficit costs, warning that the public debt as a share of the national debt, currently about $27.6 trillion, will hit new records over the next decade and account for 10% of the economy’s share of debt. Proportion of the total ten years.
Public debt is about 97% of GDP, but at current spending rates it is expected to exceed 100% soon.
Yellen praised President Joe Biden’s plan to handle the situation.
“In the president’s proposed budget for next fiscal year, he proposes to reduce the deficit by $3 trillion over the next decade,” she said. “That’s enough to basically keep the debt-to-income ratio stable, and the interest burden will stabilize.”
this fiscal deficit The 2024 budget is $1.2 trillion, with four months left in the fiscal year. In 2023, the shortfall totals $1.7 trillion.
The cost of debt financing continues to rise as the Federal Reserve raises interest rates to reduce inflation that will reach the highest level in more than 40 years in mid-2022. Inflation has since receded, but the Fed will keep its benchmark interest rate at a high level, waiting for more evidence that price growth convincingly returns to the central bank’s 2% target.
The Federal Reserve said after this week’s policy meeting that it had made “moderate” progress on inflation but was not yet ready to start cutting interest rates. Former Fed Chair Janet Yellen declined to comment on the central bank’s actions.
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