July 25, 2014

Yellen Offers Advice on Deficit Reduction

  • The national debt has grown significantly in recent years due to rising annual deficits. A deficit occurs in any year the government spends more...

Although Janet L. Yellen is expected to win confirmation as the next chairman of the Federal Reserve, lawmakers in both parties took advantage of her recent congressional appearance to express various concerns about slow economic growth and the Fed’s efforts to bolster the recovery.

Yellen, the Fed’s vice chair, reiterated her concerns about high unemployment and her belief that further efforts to stimulate the economy through monetary policy were justified.

Lawmakers who are concerned about slow economic growth should keep in mind that Congress has often made things worse – and the Fed’s job more difficult. Certainly the recent government shut-down didn’t help. Neither have poorly designed sequestration cuts.

As Yellen noted, fiscal policy -- set by Congress and the President -- has caused “a substantial drag” on the economy over the last year and worked at cross purposes to the Fed’s efforts.

She said it is important to put the federal deficit and debt on a sustainable path. But Yellen advised lawmakers to focus deficit-reduction efforts on the “medium term” and avoid measures that could cause immediate harm to an economic recovery she characterized as “fragile.”