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Treasury Secretary Yellen believes that the level of US debt is “reasonable” if it remains at this level.

Treasury Secretary Yellen believes that the level of US debt is “reasonable” if it remains at this level.
Treasury Secretary Yellen believes that the level of US debt is “reasonable” if it remains at this level.


Treasury Secretary Janet Yellen said Thursday that the rising national debt is manageable as long as it stays where it is relative to the rest of the economy.

In an interview with CNBC, Yellen also noted that high interest rates are adding to the burden as the United States manages its massive $34.7 trillion debt.

“If the debt is stabilized relative to the size of the economy, we're in a reasonable place,” she told CNBC's Andrew Ross Sorkin during a live interview on “Squawk Box.” “The way I look at it is we should look at the real interest cost of the debt. That's really what the burden is.”

In fiscal 2024, net interest charges on the debt totaled $601 billion more than the government spent on health care or defense and more than four times what it dedicated to education.

Several Congressional Budget Office reports have warned of skyrocketing debt costs and deficits, warning that over the next decade the public share of the national debt, currently about 27,600 billion dollars, will reach a new record as a share of the total economy over the next decade.

The government's share of the national debt in GDP stands at around 97% but is expected to soon exceed 100% at current spending rates.

Yellen touted President Joe Biden's plans to handle the situation.

“In the president's budget for the upcoming fiscal year, he proposes a $3 trillion deficit reduction over the next decade,” she said. “This is enough to keep the debt-to-income ratio stable, and the interest burden would be stabilized.”

The budget deficit for 2024 stands at $1.2 trillion, with four months remaining in the fiscal year. In 2023, the deficit was $1.7 trillion.

The rise in debt financing costs came as the Federal Reserve raised interest rates in mid-2022 to lower an inflation rate that had reached its highest level in more than 40 years. Inflation has since fallen, but the Fed has kept its benchmark rates higher while awaiting evidence that the rate of price increases is convincingly returning toward the central bank's 2% target.

At the end of its policy meeting this week, the Fed said it had seen “modest” progress on inflation but was not ready to start cutting rates. Yellen, a former Fed chair, declined to comment on the central bank's actions.

At an event later in the day, Yellen said the administration was aware of the inflation problem, but noted that the United States “is enjoying the strongest recovery of any advanced country, and that our strong growth is truly driving global growth.”

“Americans are clearly very concerned about the cost of living, and addressing the high cost of living remains a major economic priority for the president,” Yellen said during a luncheon with the Economic Club of New York. “We know there are areas of their budget where Americans are really struggling to make ends meet.”

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