America is racking up dangerous amounts of debt because of its excessive spending, and future generations are likely to suffer the consequences, Jerome Powell said.
“The US federal government’s on an unsustainable fiscal path,” the Federal Reserve chair said in a “60 Minutes” interview broadcast on Sunday. “The debt is growing faster than the economy.”
Fiscal deficits over the past four years alone have totaled about $9 trillion, which has helped to more than triple the national debt to a record $34 trillion in the past two decades, Treasury data shows.
The pandemic spurred federal authorities to spend heavily to stimulate the economy, but there’s now an urgent need for prudent budgeting, Powell said.
“It’s probably time, or past time, to get back to an adult conversation among elected officials about getting the federal government back on a sustainable fiscal path,” he said.
The central-bank chief expressed deep worry that irresponsible spending today would hurt Americans down the line.
“We’re borrowing from future generations,” he said. “Every generation really should pay for the things that it needs,” he continued, instead of borrowing and lumping their progeny with interest expenses and the burden of repayment.
“It really should pay for those things and not hand the bills to our children and grandchildren.”
As Fed chairman since 2018, Powell has played a key role in America’s economic fortunes. Inflation spiked to a 40-year high of more than 9% in mid-2022, and the Fed responded by hiking interest rates from nearly zero to north of 5% by last summer to curb demand and cool price growth.
The rate hikes have helped to lower inflation to below 4% in recent months, unemployment has remained near a record low, and the economy has defied recession fears with growth clocking in above 3% last year.
Although inflation remains well above the Fed’s 2% target, Powell and his colleagues have penciled in three rate cuts for this year. The surge in interest costs has squeezed consumers and businesses by making credit cards, car loans, mortgages, and other types of debt more expensive, and also heaped pressure on vulnerable sectors like commercial real estate and regional banking.
While Powell’s focus is on maximizing employment and ensuring low and stable inflation, lowering rates would also help the US government to borrow more cheaply, lessening the problem of its ballooning interest payments.