BURSTTreasury Secretary Janet Yellen is concerned about the nation’s “fiscal sustainability” this week and said she’s “sorry” that “more progress” wasn’t achieved during the Biden administration.
Yellen made the comment during a discussion held by The Wall Street Journal’s CEO Summit on Tuesday. Greg Ip, chief economics commentator for the publication, had asked about the federal budget deficit the Biden administration leaves behind, and whether she was sorry more progress wasn’t made on the matter and the economic risks at stake.
“Well, I am concerned about fiscal sustainability, and I am sorry that we haven't made more progress. I believe that the deficit needs to be brought down, especially now that we're in an environment of higher interest rates,” Yellen said.
Yellen pointed to the interest cost of the nation’s debt, which she described as “one of the largest items responsible for the increase in the budget deficit.”
The federal budget deficit reached $622 billion over the past two months, the Congressional Budget Office (CBO) estimated in its recent monthly budget review. The figure marks a $242 billion increase from the deficit recorded during the same period in the previous fiscal year, as outlays saw an 18 percent jump, while revenues dipped 7 percent.
The CBO said outlays for some of the government’s largest mandatory spending programs, namely Social Security and Medicare, rose by $32 billion during that time frame. The office also reported increases for the Environmental Protection Agency, spending bumps for the departments of Defense and Veterans Affairs and outlays to net interest on the public debt – which rose 7 percent compared to the same period the last fiscal year.
The national debt has risen to more than $36 trillion overall.
Congress last passed legislation addressing the nation’s borrowing limit in the first half of 2023, when Biden and then-Speaker Kevin McCarthy (R-Calif.) struck a deal to suspend the debt limit through 2024, along with an agreement to cap annual government funding.
Yellen cited that legislation, dubbed the Fiscal Responsibility Act, and its projected impact on helping lower the nation’s deficits over the next decade, as well as the president’s proposals aimed at trimming the nation’s deficits largely through tax changes targeting billionaires and corporations.
“That plus allowing the expiration of parts of the [Tax Cut an Jobs Act of 2017] to expire was sufficient to keep our fiscal policy on a sustainable course, but there will be important negotiations over what happens with those expiring tax provisions,” Yellen said, while referring to Trump’s signature 2017 tax plan.
“If everything is kept in place, and they're not allowed to expire, we just keep [TCJA] as it is today, CBO has estimated that the cost of that is $5 trillion so I believe it's important,” Yellen said, while pushing Congress to explore pay-fors for “whatever they do extend to avoid that explosion of our deficit from a starting point where the deficit is already too high.”