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Jared Bernstein Warns of Rising Interest Rates and Congressional Inaction Regarding the $40 Trillion National Debt

Jared Bernstein, chair of the US Council of Economic Advisers, stated that the national debt has reached $40 trillion, a figure he described as a significant distraction from the core issue of debt sustainability. Bernstein noted that while the debt is manageable as long as the economy grows faster than the debt accumulates, he is increasingly concerned by rising interest rates and a lack of reaction from Congress.

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He observed that budget deficits are currently reaching 4% to 6% of GDP, which he characterized as recessionary-level deficits. Bernstein suggested that the path to repairing the debt is possible through reversing certain tax cuts on the upper end of the income and wealth scale. He acknowledged that while Republicans have been a primary driver of the unsustainable fiscal path through tax cuts, Democrats have also endorsed many of those measures rather than reversing them. To address the debt, Bernstein emphasized that the debt ratio relative to the economy is more important than the total stock of debt. He argued that the administration must eventually find ways to stop the debt from growing faster than the economic growth rate to prevent a debt spiral over the next decade.

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