U.S. Treasury Secretary Janet Yellen stated during a congressional hearing on Thursday that President Joe Biden's upcoming spending plan will raise the national debt to higher levels, but not beyond the country's capacity. According to U.S. media reports, based on internal documents and informed sources, Biden is set to unveil a $6 trillion spending proposal on Friday, which includes previously announced plans, such as approximately $2 trillion allocated for infrastructure modernization and $1.6 trillion for education and workforce development.
Yellen did not provide details about the budget during the hearing before the House Appropriations Committee but acknowledged that under the proposed plan, the national debt-to-GDP ratio "will increase slightly" beyond the 100.1% recorded in 2020. Nevertheless, Yellen argued that with declining inflation rates and Treasury bond yields, the country can manage this debt. She said, "At least during the period of the proposal we will present tomorrow, it will remain within and below historical levels, and I believe it should stay that way."
Biden asserts that Washington needs significant spending to help the world's largest economy recover from the impacts of the COVID-19 pandemic and to improve the United States' competitiveness against other nations. In March, the Democratic president was able to pass a $1.9 trillion rescue plan to support recovery; however, his proposals for infrastructure and social services faced opposition from Republicans, who are concerned about the costs and the tax increases required to fund them.
In January, the Congressional Budget Office projected that the national debt would rise to $22.5 trillion, or 102.3% of GDP in 2021, without accounting for the recent spending from the American Rescue Plan. Reports indicate that Biden's spending plans will increase the U.S. debt-to-GDP ratio to 116% by 2027.
