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>>Yellen warns that increasing fiscal dominance poses a threat to the US economy.

Yellen warns that increasing fiscal dominance poses a threat to the US economy.

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5 days ago

Yellen Warns of Growing Fiscal Dominance

Janet Yellen, the first woman to chair the Federal Reserve, said the conditions for fiscal dominance are strengthening. She delivered the remarks at the American Economic Association meeting in Philadelphia on January 4. Yellen highlighted that rising federal debt forces the Fed to keep rates low to ease debt‑service costs, undermining inflation control.

Debt Surge and Expert Concerns

The U.S. national debt topped $38.5 trillion in early 2026, hitting a level once projected for 2030. The Congressional Budget Office forecasts a $1.9 trillion deficit this year, pushing debt to nearly 100 % of GDP and possibly 118 % within a decade. Economists such as Loretta Mester warn that policymakers underestimate the urgency, while noting fiscal dominance could become a real threat.

Calls for Prompt Action

Yellen urges Congress to act on looming Social Security and Medicare shortfalls to avoid a bipartisan bailout. David Romer doubts a cross‑party agreement will prevent a fiscal crisis, stressing that inaction harms both the Treasury and the Fed. The consensus among experts is that close monitoring and decisive reforms are essential to curb the debt burden.