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Today, Federal Reserve Chair Jerome Powell encouraged Congress to address our high and rising national debt while the economy is strong.
During testimony before the Committee on Financial Services, Powell noted that the current economic expansion is the longest on record and emphasized the need to consider the long-term implications of fiscal policy:
“The current low interest rate environment means that it would be important for fiscal policy to help support the economy if it weakens. Putting the federal budget on a sustainable path when the economy is strong would help ensure that policymakers have the space to use fiscal policy to assist in stabilizing the economy during a downturn. A more sustainable federal budget could also support the economy’s growth over the long term.”
Under current law, federal deficits will exceed $1 trillion in 2020 and each year over the next decade, and the national debt will soon surpass the size of the economy, according to the latest projections from the non-partisan Congressional Budget Office, which were released just last week.
Powell’s statement comes a day after the Trump administration released the president’s budget, which proposed significant spending cuts but relied on overly optimistic economic projections for growth. Economic growth was weaker in 2019 than in 2018, and most observers outside of the administration expect a further slowdown in coming years.