janet l yellen : fiscal responsibility and global rebalancing speech by ms janet l yellen, vice chair of the board of governors of the federal reserve system, at the committee for economic development 2010 international counterparts conference, new york, 1 december 2010. * * * good morning. thank you for inviting me to be with you today. the committee for economic development has a long and distinguished record in identifying and addressing crucial issues related to our nation ’ s economic growth and productivity. and today ’ s conference on fiscal sustainability and the global economy fits squarely within that tradition. my remarks will focus on the challenges faced by u. s. policymakers as they confront the need to put fiscal policy on a sustainable track in the long term while providing support to the economy in the near term. i will also offer some thoughts on the recent actions undertaken by the federal reserve and on the implications of our nation ’ s fiscal and monetary policy choices for the global economy. 1 the challenge of achieving fiscal sustainability in the united states charting a sensible course for the federal budget is an essential but formidable task for u. s. policymakers. since the onset of the recent recession and financial crisis, the federal budget deficit has soared as the weak economy has depressed revenues and pushed up expenditures and as necessary policy actions have been taken to help ease the recession and shore up the financial system. at 9 percent of gross domestic product ( gdp ), the budget deficit in fiscal year 2010 was a little lower than it had been a year earlier, but it was still considerably above the average of 2 percent of gdp during the pre - crisis period from fiscal 2005 to 2007. as a result of the recent deficits, federal debt held by the public has increased to around 60 percent of gdp – a level not seen in 60 years. for now, the budget deficit seems to have topped out. so long as the economy and financial markets continue to recover, the deficit should narrow relative to gdp over the next few years as a growing economy boosts revenues and reduces safety - net expenditures and as the policies put in place to provide economic stimulus and promote financial stability wind down. that said, the budget situation over the longer run presents some very difficult challenges, in part because the aging of the u. s. population implies a sizable and sustained increase in the share of the population receiving benefits from social security, medicare, and medicaid. currently, there are about five individuals between the ages of 20 and 64 for each person aged 65

here, of course, remains an open one, as it always must. the board ’ s focus will be on doing our part to secure a durable expansion and on achieving the medium - term target for inflation of 2 – 3 per cent on average. conclusion australia has survived what some have labelled “ the great recession ” in the global economy. so, as it turns out, have a number of countries that are of importance to us in our region. the common ingredient seems to have been reasonably healthy financial systems accompanied by liberal doses of policy stimulus. our task, and theirs, is now to manage a new economic upswing. this will be just as challenging, in its own way, as managing the downturn. but it ’ s a challenge plenty of other countries would like to have.