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U.S. Federal Reserve Chairman Jerome Powell on Thursday reiterated the urgency for the U.S. Congress to address the issue of growing budget deficit, noting that there would otherwise be less fiscal space to support the economy in a downturn.
At a hearing held by the House Budget Committee, the central bank chief said the federal budget is on an unsustainable path, with high and rising debt, which, over time, could restrain fiscal policymakers' willingness or ability to support economic activity when the next recession hits.
Powell's remarks came one day after similar comments before the Joint Economic Committee of Congress, a panel with members from both the U.S. House of Representatives and Senate.
At the hearing Thursday, the Fed chairman again highlighted the importance of fiscal policy, noting that the central bank has a limited ability to respond to a downturn with its already low benchmark interest rate. Three rate cuts since July put the current federal funds rate target range at 1.5 percent to 1.75 percent.
The debt is growing faster than the U.S. economy, Powell said. Future generations would have fewer resources in education, health and beyond because they would spend their tax dollars servicing debt, he said.
The Fed chairman said there must be a "broad national commitment" to tackle the issue, with "consistent" approach over a long period of time, urging the Congress to make efforts in that regard.
According to data released by U.S. Treasury Department on Wednesday, the deficit in October was 134 billion U.S. dollars, a 34 percent increase from the same month last year.
"We're in a world of trillion-dollar deficits now. Thanks to recent tax cuts and spending hikes, what we saw last month is just the tip of the iceberg," Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan watchdog group, said in a statement.
"It's time for lawmakers to take notice. Instead of more spending increases and tax cuts, we need a plan to correct our debt trajectory. The longer we wait to act, the fewer choices we will have and the more painful they will be," MacGuineas said.
The U.S. federal budget deficit reached 984 billion U.S. dollars in the fiscal year 2019 (which ended on Sept. 30), up by 26 percent year-on-year, and is the highest since 2012, data from the Treasury Department showed. The federal deficit was 4.6 percent of the gross domestic product (GDP) in the fiscal year, which is 0.8 percentage points higher than the previous year.
(ASIA PACIFIC DAILY)
