Yellen: We Have ‘Normal’ National Debt Interest Burden

Treasury Secretary Janet Yellen noted that although the national debt’s interest burden is currently at a “normal” level, President Joe Biden aims to reduce the deficit to support economic investments.

Yellen highlighted the need to let parts of the Tax Cuts and Jobs Act expire to achieve this goal.

She emphasized the importance of containing deficits to prevent an escalation in the debt burden and noted Biden’s proposal for three trillion dollars in deficit reduction over the next decade while prioritizing economic growth through necessary investments.

National debt is at a “normal” level, but Biden is looking to cut the deficit, “and doing that would be compatible with making investments in the economy that are necessary to support its growth. But we’re going to have to let important pieces of the Tax Cut[s] and Job[s] Act expire,” Yellen said.

Yellen added, “Well, the debt — the ratio of debt to GDP — we have a very large economy, and the ratio of debt to GDP is about 100%, which is high in historical terms. But real interest rates are lower than they have been throughout much of our history.”

“And so, right now, the interest burden of the debt is at what I would call normal historical levels. To stay there over the next decade or more, it’s necessary to contain deficits and to counter what would otherwise be an increase in the burden of the debt.”

She added, “I think it’s necessary to contain deficits, and the President’s budget is full of proposals to do exactly that. He’s proposed three trillion dollars in deficit reduction over the next decade, and doing that would be compatible with making investments in the economy that are necessary to support its growth. But we’re going to have to let important pieces of the Tax Cut[s] and Job[s] Act expire. The President wants to protect households making under $400,000, but that was a huge deficit-increasing tax cut and it has lowered our tax revenues and resulted in a huge increase in debt.”