The chairman of the Federal Reserve issued an ominous warning to lawmakers Wednesday that the federal budget is on “an unsustainable path,” with growing debt and deficits continually unchecked.
“As noted in the Congressional Budget Office’s recent outlook, the federal budget is on an unsustainable path with high and rising debt,” Jerome Powell cautioned members of the Joint Economic Committee.
Fed Chair Powell: "The federal budget is on an unsustainable path with high and rising debt."
— CSPAN (@cspan) November 13, 2019
“Over time, this outlook could reduce fiscal policymakers’ willingness or ability to support economic activity during a downturn. In addition, I remain concerned that the high and rising federal debt can in the longer term restrain private investment and thereby reduce productivity and overall growth.”
Powell’s warnings come as the federal debt and deficits reach all-time highs, with the national debt now soaring above $23 trillion and the deficit reaching nearly $1 trillion in the 2019 fiscal year. The Congressional Budget Office has forecasted the deficit to surpass the $1 trillion mark next year.
While Powell voiced his concerns over the nation’s finances on Wednesday, his testimony before the House Budget Committee on Thursday struck a different tone, easing the anxiety of those worried about the nation’s finances by arguing that he does not see the a “day of reckoning” in the immediate future.
“If you look at today’s economy, there’s nothing that’s really booming now that would want to bust. In other words, it’s a pretty sustainable picture,” Powell said.
Powell also noted that he does not see a recession on its way, contrary to the claims of Democrats predicting an economic downturn before the 2020 presidential election.
“We are the strongest country, we have the best institutions, we have the best labor force,” Powell told lawmakers. “We have such strengths, and I think possibly the day of reckoning could be quite far off.”
Powell’s remarks before Congress were made the same week that the Treasury Department revealed the federal deficit reached $134 billion for the month of October. As the chart below from the Treasury Department reveals, $145 billion in government spending for October came from entitlement programs on Social Security and Medicare alone. These are the programs driving the national debt, deficits, and the unfunded liabilities tsunami.
To get the nation’s finances in order, lawmakers must therefore confront entitlements, which suffocate the federal tax intake.
Yet candidates running for president have said virtually nothing about the nation’s darkening financial outlook, and instead have championed prohibitively expensive programs that would only make the problem exponentially worse, accompanied by steep tax increases on all Americans that would simultaneously depress the economy.
Even worse, proposals touted on the campaign trail such as the Green New Deal and “Medicare for All” promise to shrink the economy. As senior Federalist contributor and expert on health care Chris Jacobs explains, Massachusetts Sen. Elizabeth Warren’s plan for Medicare for All is poised to shrink the economy so much that her own proposal to pay for the program will come up trillions of dollars short.
“If taxing “the rich” and corporations shrinks the economy—which it undoubtedly will—then Warren’s revenue forecast won’t meet projections, and she will have a huge, multi-trillion-dollar hole in her estimates,” Jacobs wrote.