US Federal Reserve Chairman Jerome Powell told lawmakers now might be a good time to put the federal budget on a sustainable path amid a growing deficit
WASHINGTON (Pakistan Point News / Sputnik - 12th February, 2020) US Federal Reserve Chairman Jerome Powell told lawmakers now might be a good time to put the federal budget on a sustainable path amid a growing deficit.
On Monday, President Donald Trump unveiled a $4.8 trillion budget for 2021 which the Congressional Budget Office (CBO) estimates could add another $5 trillion in debt over the next decade. The watchdog warned that the federal budget is currently on an "unsustainable trajectory."
"Putting the federal budget on a sustainable path when the economy is strong would help ensure that policymakers have the space to use fiscal policy to assist in stabilizing the economy during a downturn," Powell said on Tuesday while delivering his semiannual testimony and monetary policy report to Congress. "A more sustainable federal budget could also support the economy's growth over the long term."
The Trump administration's projected spending is likely to expand the US federal budget deficit to beyond the $1 trillion mark this year. Trump's new budget request, however, is unlikely to get approved without a fierce battle in the Democratic-controlled House of Representatives.
The budget deficit aside, the broader US federal debt has also expanded by about $3 trillion since Trump came to office.
In terms of the broader outlook, the Federal Reserve chairman said the US economy was in a very good place and looks "resilient" despite threats from the coronavirus crisis.
As the foremost institution responsible for the health of the US economy, the Federal Reserve relies on cutting interest rates in times of distress to spur growth. But with rates at below 2 percent now compared to the average of 5 percent more than a decade ago, there are worries over how much the Federal Reserve will be able to do in a downturn.
Powell, when asked about the possibility of negative US rates, said it was not a tool the Fed was looking at.
Trump, who has repeatedly criticized Powell and the Federal Reserve in the past for their handling of the economy, tweeted during the congressional hearing that the central bank was keeping interest rates above expectations.
"When Jerome Powell started his testimony today, the Dow was up 125, & heading higher," Trump tweeted, referring to the broadest stock index on the New York Stock Exchange. "As he spoke, it drifted steadily downward, as usual, and is now at -15. Germany & other countries get paid to borrow money. We are more prime, but Fed Rate is too high, Dollar tough on exports."
