In late November, former Treasury Secretary Janet Yellen spoke about her tenure and her future successor, Scott Bessent. During a Wall Street Journal event, Yellen recounted a conversation with Bessent, discussing the complexities of the Treasury Department and the capabilities of its staff. While she provided insights about the job, Yellen also reiterated her views on the importance of maintaining Federal Reserve independence and the dangers of broad tariff hikes. Despite her warnings, she expressed regret about her inability to significantly reduce the fiscal deficit during her time in office, declaring concern over fiscal sustainability now that interest rates are higher.
Yellen’s remarks are noteworthy given that her tenure coincided with an unprecedented increase in U.S. debt. Serving as Federal Reserve Chair for nearly eight years, she oversaw the economy during a period characterized by near-zero interest rates, a decision believed to have staved off economic turmoil while inadvertently contributing to a looming financial crisis. Critics contend that Yellen, similar to her predecessors, prioritized political interests and economic stability over responsible monetary policy. Her admissions about the fiscal situation raise eyebrows, especially since they come from someone whose leadership helped facilitate a massive rise in national debt.
Indeed, under Yellen’s guidance, total U.S. debt grew significantly, amounting to a staggering $15.2 trillion increase. This oversaw nearly 42% of all U.S. debt ever issued. The juxtaposition of Yellen’s concern for fiscal sustainability against this backdrop of rising debt is ironically humorous to observers, especially given her role in expanding the government’s financial obligations substantially. Critics highlight that she, more than anyone else in her position, deserves scrutiny for contributing to the nation’s fiscal challenges, and her expressions of regret ring hollow given her historical actions.
Moreover, the current fiscal situation appears even bleaker with the Biden administration’s spending agenda. As government expenditures soar and tax revenues stagnate, the deficit has ballooned to unprecedented levels. The administration has initiated this new fiscal year with the largest two-month deficit increase on record, casting doubt on any efforts to rein in spending. Yellen’s stated concerns about fiscal sustainability are further undermined by these realities, as the government’s financial strategy resembles a party that is oblivious to impending consequences.
Additionally, the federal government’s interest expenses are now second only to defense and health spending, highlighting a precarious financial situation. The rising cost of servicing national debt poses severe risks; just a single economic shock could lead to a dramatic increase in interest payments, potentially exceeding allocations for Social Security. This tenuous position is particularly alarming as it reflects an unsustainable trajectory that could threaten the country’s economic stability and the status of the U.S. dollar as the world’s reserve currency.
In essence, while Yellen may articulate concerns about fiscal responsibility, her tenure is marked by actions that contradict these sentiments. Observers express skepticism about her ability to advocate for accountability in fiscal policy, given her direct involvement in the ballooning national debt. As Yellen looks to move on from the Treasury, many are left wondering if her reflections do more to obscure the underlying issues than to address them effectively. The financial landscape looming on the horizon suggests that the ramifications of her decisions may be felt for years to come, leaving future generations to confront challenges borne from the decisions made during her watch.