edward m gramlich : reducing budget deficits remarks by mr edward m gramlich, member of the board of governors of the us federal reserve system, at the concord coalition budget and fiscal policy conference, washington, dc, 24 june 2004. * * * thank you for inviting me to speak today. three years ago, at just about this time of year, i gave a talk about the supposed large and growing federal budget surpluses that were then being projected. it then appeared that the national debt could be paid off within the decade, and my remarks addressed the economic and political implications of this declining national debt. unfortunately, much has changed for the worse since that time. rather than expecting the stream of surpluses projected just three years ago, budget analysts now expect sizable deficits for at least the remainder of the decade. the national debt as a share of gross domestic product ( gdp ), which reached almost 50 percent in 1993 and declined to 33 percent by 2001, is now rising again. today, i am here to talk about how to deal with our current worsening fiscal outlook. fiscal policy can have important long - run effects on the health of the economy, particularly through its impact on national saving and the growth of productivity. national savings can be generated privately, by households and business, or publicly, by government. although fiscal policy can, in theory, help boost private saving, this has proven difficult, in practice. instead, the most important effect of fiscal policy on national saving has been through the direct government budget. when the government runs deficits, it siphons off private savings ( reducing national saving ), leaving less available for capital investment. with less capital investment, less new equipment is provided to workers, and, all else being equal, future productivity growth rates and levels are lower. productivity growth is the principal source of improvement in economic well - being. the faster productivity increases over time, the more rapidly living standards increase. maintaining a rapid rate of trend productivity growth is particularly important in light of the coming budgetary pressures associated with the retirement of the baby boom generation. a more productive economy will ease the financing of social security and medicare benefits for tomorrow ’ s retirees without placing an undue burden on tomorrow ’ s workers. in contrast, if we allow debt to build now and in coming years, we will have both lower output to meet future obligations as well as the added burden of financing a growing amount of debt. indeed, under numerous scenarios, our current debt path is

christopher j waller : little by little, progress seems to be resuming speech by mr christopher j waller, member of the board of governors of the federal reserve system, at the peterson institute for international economics, washington dc, 21 may 2024. * * * thank you, adam, and thank you for the opportunity to speak to you today. 1 the peterson institute is renowned for its valuable contributions to research and its influence on economic policy. there really is no better place for a central banker to come and talk about the outlook for the u. s. economy and the implications for monetary policy. it truly is a pleasure to be here. peterson was also the host for my first speech as a governor back in early 2021, which unfortunately, was virtual. 2 so, after an eventful three years, it's nice to be back and in person. after a run of great data in the latter half of 2023, it seemed that significant progress on inflation would continue and that rate cuts were not far off. however, the first three months of 2024 threw cold water on that outlook, as data on both inflation and economic activity came in much hotter than anticipated. initially it seemed like the bad data might be simply a " bump " in the road, but as the data continued to point in the wrong direction, the narrative quickly turned towards concerns that the economy was not cooling as needed to keep inflation moving down toward the federal open market committee's ( fomc ) 2 percent goal. progress on inflation appeared to have stalled and there were fears that it might even be accelerating. suddenly, the public debate became whether monetary policy was restrictive enough and if rate hikes should be back on the table. but more recent data on the economy indicate that restrictive monetary policy is helping to cool off aggregate demand and the inflation data for april suggests that progress toward 2 percent has likely resumed. central bankers should never say never, but the data suggests that inflation isn't accelerating, and i believe that further increases in the policy rate are probably unnecessary. now let me turn to the data we have seen since the last fomc meeting. real gross domestic product ( gdp ) grew at about a 4 percent annual pace in the second half of 2023, and that stepped down to 1. 6 percent in the first quarter on this year. that looked like the kind of moderation that would support progress on inflation, but it was mostly due to two components that tend to be volatile and not reflect fundamental