Federal Reserve chair Jerome Powell admitted Thursday that the United States’ booming debt isn’t sustainable and that the Biden administration grossly “underestimate[d]” inflation.
Speaking before the House Financial Services Committee, he made the first admission in response to a line of questioning from North Carolina Rep. Ted Budd, a Republican.
“We’re not on a sustainable path, and we haven’t been for some time. And that means simply that the debt’s growing faster than the economy. By definition, that’s unsustainable,” he said.
However, he then somewhat downplayed the crisis facing America by claiming that there’s plenty of time to handle it.
“There will be a point at which it becomes a problem of servicing the debt. We’re not at that point. We’re not close to that point,” he said.
“But we will need to get back where revenues and spending are better aligned. We don’t need to pay the debt down. We just need to have the economy growing as fast or faster over a long period of time, and we must do that,” he then added.
Powell made the second admission in response to a question from Missouri Rep. Ann Wagner, a Republican.
“I want to be honest, sir. The Fed, I think, underestimated actual inflation. What do you think you missed?” the Republican lawmaker said to him.
“Well, we did underestimate it. With the benefit of hindsight, clearly we did,” Powell replied.
However, he then attempted to make excuses for the administration’s stunningly poor projections.
“So it comes down to the judgment we had to make. It’s really nothing to do with our framework or anything like that. And every central bank had to make this same judgment, which was looking at the supply chain problems and the shock to labor force participation — millions of people out of the labor force — we had to decide whether that was going to be a lasting thing, or whether it would kind of turn around quickly,” he said.
“We had really high levels of labor force participation. Suddenly they’re much lower. The thought was people would come back as soon as COVID’s over. We have these new vaccines. Every American’s going to get vaccinated. We’ll be done with COVID by the end of the year,” he continued. “So basically, these supply-side issues broadly speaking just didn’t get better. That was the judgment we had to make. We knew it could be wrong, and I think when it started to look pretty wrong, we pivoted.”
That is not true. The administration’s continued to tout “transitory inflation” til the tail end of 2021, despite economists everywhere warning that the inflation was here to stay.
Then once the war in Ukraine erupted in February, the administration began blaming months and months of inflation on Russian President Vladimir Putin.
Red dot = When Trump took office
Blue dot = When Biden took office
— Ryan Saavedra (@RealSaavedra) June 22, 2022
As for the debt, it’s currently at $30 trillion and counting, with the biggest driver of it being the numerous entitlement programs that both congressional Republicans and congressional Democrats refuse to tackle.
“The main drivers are still mandatory spending programs, namely Social Security — the largest U.S. government program — Medicare, and Medicaid. Their costs, which currently account for nearly half of all federal spending, are expected to surge as a percentage of GDP because of the aging U.S. population and resultant rising health expenses,” according to the Council of Foreign Relations.
The U.S. Government Accountability Office’s latest “Fiscal Health” report says the exact same thing: “Medicare and Social Security costs drive spending increases, especially as the population continues to get older. … Under GAO’s simulation, spending for both major federal health care programs and Social Security would account for 85 percent of projected revenue in 2050, up from 63 percent in 2019.”
The Democrat approach to tackling the debt has been to keep increasing taxes. The Republican approach meanwhile has mostly centered on ignoring it.
Libertarians, a rare financial breed, are the only ones who regularly call for reforming America’s numerous entitlement programs, including welfare.
As for the time factor, Powell appears to have grossly overestimated how much time America has to tackle the debt.
The Social Security and Medicare Trustees latest report, released earlier this month, found that “Medicare’s Hospital Insurance trust fund will be insolvent by 2028, Social Security’s Old-Age and Survivors Insurance trust fund will run out of reserves by 2034, and the theoretically combined Social Security trust funds will be insolvent by 2035.”
When this happens, “Social Security benefits will be reduced across-the-board by 20 percent under current law while Medicare Hospital Insurance payments will be reduced by 10 percent.”
“The looming insolvency of #SocialSecurity and #Medicare are problems we’ve known about for decades. It’s long past time to enact trust fund solutions that put these programs and our #nationaldebt on a more sustainable path.” https://t.co/Hkl6pm9u1A.
— CRFB.org (@BudgetHawks) June 2, 2022
Few want to tackle the debt, in part because everybody feels they’re owed this or that from the government, but unless someone does what’s necessary sooner rather than later, everybody will eventually pay the price …
DONATE TO AMERICAN WIRE
If you are fed up with letting radical big tech execs, phony fact-checkers, tyrannical liberals and a lying mainstream media have unprecedented power over your news please consider making a donation to American Wire News to help us fight them.
- Barr doesn’t believe Trump should run again: ‘Obviously bent on revenge more than anything else’ - August 6, 2022
- Maher blasts effects of botched Afghanistan withdrawal: ‘Terrorists are running wild’ - August 6, 2022
- Actress rails against ‘every single woke voter’ over out-of-control crime: ‘Keep voting for this’ - August 6, 2022
We have no tolerance for comments containing violence, racism, profanity, vulgarity, doxing, or discourteous behavior. If a comment is spam, instead of replying to it please click the ∨ icon below and to the right of that comment. Thank you for partnering with us to maintain fruitful conversation.