Former Federal Reserve Chairman Alan Greenspan said Thursday that the country’s “extraordinary budget deficits” could lead to a “rapid rate of price increases,” Fox Business Network reports.
Greenspan, who headed the Fed from 1987 to 2006, told the network that "unless we bring those extraordinary budget deficits under control, history tells us this is going to be a much more rapid rate of price increases than we’ve seen.”
The U.S. federal debt has risen by roughly $3 trillion since President Donald Trump’s inauguration, and earlier this month he proposed a $4.8 trillion federal budget with cuts to Medicare and Medicaid. The Congressional Budget Office recently found that the U.S. budget deficit will likely pass $1 trillion this year for the first time since 2012.
"This is going to be a very significant problem. Nobody wants to cut spending, or raise taxes. But if you look at the data that the Congressional Budget Office put out, we need very significant changes," Greenspan warned.
"Unless we bring those extraordinary budget deficits under control, history tells us this is going to be a much more rapid rate of price increases than we’ve seen," Greenspan told Fox Business Network.
"This is going to be a very significant problem," Greenspan said. "Nobody wants to cut spending, or raise taxes. But if you look at the data that the Congressional Budget Office put out, we need very significant changes."
Meanwhile, the U.S. budget deficit through the first four months of this budget year is up 19% from the same period a year ago, putting the country on track to record its first $1 trillion deficit since 2012, the Associated Press explained.
The Treasury Department said recently in its monthly budget report that the deficit from October through January was $389.2 billion, up $78.9 billion from the same period last year.
The deficit reflected government spending that has grown 10.3% this budget year while revenues were up only 6.1%. For January, the deficit totaled $32.6 billion, compared to a surplus a year ago of $8.68 billion.
President Donald Trump recently sent Congress a new budget blueprint that projects the deficit will top $1 trillion this year but then will decline over the next decade.
The Congressional Budget Office, however, is projecting that the deficit will top $1 trillion this year and remain above $1 trillion over the next decade.
Fed Chairman Jerome Powell told Congress earlier this month that legislators must work to lower the deficit.
“Putting the federal budget on a sustainable path when the economy is strong would help ensure that policymakers have the space to use fiscal policy to assist in stabilizing the economy during a downturn,” he said. “A more sustainable federal budget could also support the economy’s growth over the long term.”