October 24, 2014

Yellen Calls for Long-Term Fiscal Sustainability

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

Janet Yellen, who took over as Federal Reserve chair in February, continues to call for a smooth transition to more sustainable fiscal policies on Capitol Hill.

In testimony to two congressional committees last week, she said that “having a long-run sustainable fiscal policy, a debt-to-GDP path, that can be maintained over time does require changes, but it doesn't require changes that would come into effect so quickly that it would impede the recovery.”

Yellen reiterated views she has expressed in past congressional appearances, calling for lawmakers to enact short-term policies to aid the economic recovery while also pursuing longer-term reforms to put the budget on a sustainable path. Her immediate predecessor as Fed chair, Ben Bernanke, repeatedly offered Congress similar advice.

Yellen also said officials, while crafting fiscal policy in the coming years, would have to consider the government’s rising interest payments as the economy improves and federal debt increases.