- The Washington Times - Wednesday, July 12, 2017

The U.S. economy is rebounding and will grow modestly over the next few years but exploding federal debt could derail it, Federal Reserve Chairwoman Janet Yellen told Congress on Wednesday.

Gross domestic product is projected to grow about 2 percent a year, Ms. Yellen said, though she said the economic forecasting always has “considerable uncertainty.”

“At present, I see roughly equal odds that the U.S. economy’s performance will be somewhat stronger or somewhat less strong than we currently project,” she testified to the House Financial Services Committee.

Ms. Yellen said the labor market is improving fast enough that the Federal Reserve will likely raise its benchmark interest rate in coming years, aiming to keep the economy growing while limiting inflation.

But, she said, the gains could be squandered if Congress doesn’t get a handle on ballooning deficits.

Gains made six years ago, when a GOP House forced spending cuts, have been lost in recent years as both parties have rushed to boost spending for defense and domestic programs — all while refusing to rein in growth in entitlements, such as Obamacare, Medicare and Social Security.

“I believe a key thing that Congress should be taking into account when designing fiscal policy is to achieve sustainability of this debt path over time,” Ms. Yellen said.

Republicans have been hoping that a rollback of Obama-era regulations, an Obamacare repeal and a tax code overhaul could supercharge the economy and send it north of 3 percent annual growth. They say that if the economy grows that quickly, tax revenue will rise.

But some fear the Fed could hinder those plans with interest-rate increases.

The GOP says the central bank, which sets interest rates and provides guidance for other banks and lenders across the country, overloaded its balance sheet when it bought up mortgage-backed securities to try to mitigate the 2008 economic downturn, and has warned that it could soon move to bail out student loan and public pension funds.

“If we are not careful, we may wake up one day to find our central bankers have instead become our central planners,” said Rep. Jeb Hensarling, Texas Republican and chairman of the committee.

Democrats, though, said Mr. Trump and congressional Republicans are the ones creating uncertainty with their push to roll back financial regulations Democrats passed after the 2008 market crash.

“Since day one, the story of the Trump administration has been one of chaos and turmoil,” said Rep. Maxine Waters, California Democrat and the panel’s ranking member.

Ms. Yellen also acknowledged that Wednesday might be one of the last times she appears before the committee in her current role. Her term is up in February, and Mr. Trump has not indicated whether he will reappoint her.

“I absolutely intend to serve out my term,” she said.

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