As the United States’ national debt approaches $34.2 trillion, key figures in the finance world have started expressing their concerns. Surprisingly, Federal Reserve Chairman Jerome Powell joined the conversation earlier than expected, addressing the issue on CBS’s 60 Minutes this Sunday. Powell issued a warning, stating, “In the long run, the U.S. is on an unsustainable fiscal path.”
Despite the U.S. economy avoiding the predicted recession in 2023, the combination of record government spending and decreased tax receipts has propelled the national debt to an all-time high. This trend continues into the current year, with the U.S. government debt to GDP ratio, a measure of total public debt to economic growth, surging from just over 100% in 2019 to over 120%. While lower than the COVID-era peak of 133%, Powell emphasized that the government’s debt is still “growing faster than the economy.”
Powell urged elected officials to engage in an “adult conversation” about restoring the federal government to a sustainable fiscal path, stating that it is “past time.”
Borrowing from Future Generations
It’s unusual for a Fed official to delve into politics, given the central bank’s nonpartisan and independent nature. Powell reinforced this during his 60 Minutes interview, emphasizing the avoidance of commenting on fiscal policy. However, he criticized lawmakers for “effectively borrowing from future generations” with their “unsustainable” policies. Powell added, “It’s time for us to get back to putting a priority on fiscal sustainability.”
Powell joins other critics of fiscal policy and the escalating national debt, including JPMorgan Chase CEO Jamie Dimon, who warned of an impending economic “cliff” if the debt burden isn’t addressed.
Other Wall Street Perspectives
Wall Street heavyweights have long criticized rising federal deficits. Mark Spitznagel, founder and CIO of Universa Investments, referred to the current situation as “the greatest credit bubble in human history.” Ray Dalio, founder of Bridgewater Associates, has been warning of an impending debt crisis.
Despite the concerns, Powell highlighted the resilience of the U.S. economy, describing it as “dynamic, innovative, flexible, adaptable” compared to other countries. While acknowledging the challenges, he emphasized that rectifying the debt situation is still possible, stating, “Sooner is better than later.”
Despite criticism, Treasury Secretary Janet Yellen dismissed concerns about the rising national debt, focusing on net interest payments as a share of GDP, which she argued remains “at a very reasonable level.”
This story was originally featured on Fortune.com
