Treasury Secretary: $18T Debt Is Not ‘The Most Pressing Concern Today’
By Susan Jones | June 18, 2015
U.S. Treasury Secretary Jacob Lew chairs the Financial Stability Oversight Council, which grew out of the 2010 Dodd-Frank law. (AP File Photo)
“I don’t think right now that debt 20, 30 years from now is the thing that’s holding our economy back,” Lew told the hearing focusing on the annual report of the Financial Stability Oversight Council (FSOC).
Lew chairs the FSOC, a body formed in 2010 to respond to emerging risks to the U.S. financial system. “I think if you look at the risks to our economy from federal spending and debt, we are in a much better position now than we were six and a half years ago,” Lew told Luetkemeyer. Lew later noted that “debt as a percentage of GDP has stabilized for this period of time. We have made enormous progress, it was climbing, and it has stabilized.”
Luetkemeyer pointed to a June 16 Congressional Budget Office report that warns: “If current laws remained generally unchanged, federal debt held by the public would exceed 100 percent of GDP by 2040 and continue on an upward path relative to the size of the economy — a trend that could not be sustained indefinitely.”
But Lew said that CBO report “makes clear that over the next ten years, we’re in a pretty stable place.”
The report projects that under current law, federal debt held by the public would decline slightly relative to GDP over the next few years…After that, however, growing budget deficits — caused mainly by the aging of the population and rising health care costs — would push debt back to, and then above, its current high level. The deficit would grow from less than 3 percent of GDP this year to more than 6 percent in 2040. At that point, 25 years from now, federal debt held by the public would exceed 100 percent of GDP.”
Lew told Congress, “I think the thing in that report that people are concerned about is the long-term. And obviously there are still long-term issues.” … “I think if you look at where we were, where we were in 2008, 2009, we were careening towards a very treacherous place. We’ve stabilized it and it’s improving. We still have long-term challenges and–“
Luetkemeer interrupted, telling Lew, “The point I’m trying to make is, CBO points out the debt is a problem for our economy, and yet your report does nothing, says nothing about it, and you are supposed to be an agency that points out these problems. Why is — my question is, why did you not point out that debt is a problem for our economy?”
“I — our report appropriately looks at the threats to financial stability,” Lew responded.
“So you don’t consider it a threat?” the congressman asked.
“I think that if you look at what we have — where we are today versus six years ago, the federal deficit has been brought under control for the next decade. We are in…a period where we need to get the economy growing. I totally agree with you, our conversation should be about what can we do to grow the economy,” Lew continued. “And we know there are things we could do. We could have an infrastructure program in place. We could have immigration reform. There’s lots of things we could do to grow our economy. I don’t think right now that debt 20, 30 years from now is the thing that’s holding our economy back.”
Luetkemeyer said he thinks Lew has “missed the boat…We’ve dropped the ball on this.”
Rep. Robert Pittenger (R-N.C.) asked Lew several times if he sees the debt as a threat: “Is it a vital concern to you today?”
“I don’t think it is the most pressing concern today because we have controlled the rate of growth,” Lew replied.
“So $18 trillion, that’s not a concern?” Pittenger followed up.
“As a percentage of GDP, we’ve stabilized the deficit and the growth of the debt,” Lew said. “In the next ten years, we have a stable debt and deficit situtation.”
Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, noted that the national debt is $18 trillion and counting. He called it “perhaps one of the greatest existential threats that we face,” and he noted that more debt has been incurred under President Obama than in the nation’s first 200 years.
“This is beyond negligent, it is beyond egregious. It is dangerous and, frankly, it is offensive,” Hensarling said.
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