Yellen was Right, the Federal Debt “Should Keep People Awake at Night”

by James L. Caton
The American Institute for Economic Research

In 2017, the level of federal debt as a percent of GDP hovered around 100%. It was in 2017, as she prepared for her exit from the Federal Reserve, that Janet Yellen sounded off about the danger of the growing federal debt.

“I would simply say that I am very worried about the sustainability of the U.S. debt trajectory,” Yellen said. “Our current debt-to-GDP ratio of about 75 percent is not frightening but it’s also not low.”

“It’s the type of thing that should keep people awake at night,” she added.

Yellen cites the level of federal debt held by the public in her description of the “current debt-to-GDP ratio,” which excludes federal debt held by federal agencies. After last year’s fiscal expansion, this measure of debt is now greater than 100% of GDP. The value of all federal debt currently hovers around 130% of GDP.

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