Powell: U.S. fiscal path 'unsustainable' despite current growth
Washington Times, The (DC)
Federal Reserve Chairman Jerome H. Powell warned that the United States government is on an "unsustainable fiscal path" as the national debt has ballooned to record levels.
"In the long run, the U.S. is on an unsustainable fiscal path," Mr. Powell said in a "60 Minutes" interview on CBS. "And that just means that the debt is growing faster than the economy.
"Effectively we're borrowing from future generations," he said. "It's time for us to get back to putting a priority on fiscal sustainability and sooner is better than later."
The national debt hit roughly $34 trillion in early January.
Despite his long-term worries, the Fed chairman said the economy and labor market are currently strong. According to data from the Commerce Department released on Jan. 25, the economy grew 3.3% in the fourth quarter of 2023, while job-creation numbers are also exceeding forecasts.
Mr. Powell also said the country is "making good progress" with lowering inflation rates, which have been "falling steadily" over the last 11 months in the face of multiple rate hikes without so far generating the recession that many private economists had predicted.
With inflation going down, the Fed is now facing criticism over keeping the interest rates as high as they are. The central bank has given hints of rate cuts sometime later this year, but they were unchanged in January and Mr. Powell suggested that the Fed board will hold rates steady again when it meets in March.
Some Senate Democrats have asked the Fed to cut rates to make housing affordable again in a letter sent late last month. Mortgage rates shot up in 2022 as inflation took off and have yet to subside, leaving many first-time homebuyers priced out of the market.
Democratic Sens. Elizabeth Warren of Massachusetts, John Hickenlooper of Colorado, Jacky Rosen of Nevada and Sheldon Whitehouse of Rhode Island urged the Fed "to consider the effects of your interest rate decisions on the housing market and to reverse the troubling rate hikes that have put affordable housing out of reach for too many."
But the Fed chair gave the legislators little hope of a quick fix.
"I think it's not likely that this committee will reach that level of confidence in time for the March meeting, which is in seven weeks," Mr. Powell said.
The next time the decision could be made would be in May. Analysts say the Fed is anxious to restore its credibility in the markets as an inflation fighter after inflation surged to a 40-year high in the U.S. in mid-2022.
"The kinds of things that would make us want to move sooner would be if we saw weakness in the labor market or if we saw inflation really persuasively coming down," he said. "The kind of things that would make us want to move later would be if inflation were to be more persistent, for example."