September 28, 2021—It’s been 20 years since Vice President Dick Cheney asserted to the world and the U.S. Congress that “deficits don’t matter.” Today, Treasury Secretary Janet Yellen asserted a similar sentiment when asked about the overall size of the debt.
In an exchange with Sen. Mike Rounds, R-SD, Yellen said it is the interest cost of the debt, which is virtually zero, is all that matters.
“When do we have to say, ‘Enough is enough’ when it comes to our deficit and our debt?” Rounds asked.
Yellen responded that “there are different metrics” for looking at the level of debt. One is the debt-to-GDP ratio.
“We are a little bit over 100 percent,” she added, “which has traditionally been regarded as high.”
But rather than use that metric to examine the debt level, Yellen said she prefers looking at the interest on the debt.
“But we are in a very low-interest rate environment, which has been true a very long time and um, is likely to true going forward. And an alternative — and I think better measure of fiscal sustainability — is to look at the real net-interest cost of the debt, what is it in real terms costing to service the outstanding debt,” Yellen said.
In other words, it’s a metric that allows one to think in terms of this: You never really have to pay down the debt. You only need to pay interest on it. And that allows the government to keep amassing trillions of dollars in debt.
From $5t to $20t
In the 20 years since Congress has lived by the rules that deficits and debt don’t matter, the debt has grown from $5 trillion to $28 trillion.
A ‘Little Bit’ High?
Although Yellen downplayed the debt-to-GDP ratio as “a little bit” over 100 percent, it is actually up to 125 percent of the size of the U.S. economy.
Meanwhile, Yellen is asking Congress to increase the debt limit to cover the cost of the $28 trillion debt so Treasury can pay its current bills.
It should be noted that Yellen isn’t alone in dismissing the debt and focusing on the interest. It’s a metric — and a false one at that — that allows Congress to keep spending and passing tax cuts.
