U.S. SENATE—U.S. Senator Steve Daines at a Senate Banking Committee hearing today questioned Federal Reserve Chairman Jerome Powell on the long-term effects President Biden and Senate Democrats’ inflationary spending will have on the federal debt.
Chairman Powell agreed with Senator Daines that President Biden and Senate Democrats’ inflation crisis will add fuel to the fire of the already staggering national debt. A transcript and video of the exchange is below:
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Senator Daines: “Chairman Powell — you’re raising interest rates to combat the inflation we’ve seen in the economy over the past few years. Is that correct?”
Chairman Powell: “Yes.”
Senator Daines: “And although this is the domain of Treasury, a higher Fed Funds rate will mean higher borrowing costs. Is that correct?”
Chairman Powell: “Yes, all else equal.”
Senator Daines: “So just want to connect the dots here, around why inflation was sparked. One of the big reasons was massive spending here in Washington. And now we’re going to be bearing the challenges with higher debt service over the course the next several years, where we’re going to see debt service exceeding defense spending, which — we see the threats of China, threats around the world — I think it’s very, very concerning. Now, as a grandfather of four, soon to be five, grandchildren, it’s these things you think about more and more.”
In October, Senator Daines sent a letter to the Congressional Budget Office (CBO) regarding the impact high inflation and elevated interest rates would have on the cost of servicing the federal debt.
According to CBO’s projections, annual net interest costs on the debt will eclipse what the nation spends on national defense within five years. Driven in part by surging interest payments on the debt, cumulative deficits over the next 10-year window will exceed $20 trillion, growing the total federal debt to more than $51 trillion by 2033.
Daines has introduced the “Balanced Budget Accountability Act” to help address our public debt crisis at the beginning of every new Congress since 2013.