Republican Louisiana Sen. John Kennedy accused Treasury Secretary Janet Yellen in a Tuesday hearing of striving to boost the economy by borrowing short-term, higher-interest rate debt to help President Joe Biden secure reelection.
The national debt has surged to nearly $34.6 trillion under Biden, which is around $6.8 trillion more than when he took office. Kennedy criticized Yellen for her department borrowing shorter-term bonds with higher interest rates instead of longer-term bonds that have lower interest rates. (RELATED: EXCLUSIVE: New Report Details Just How Much Regulations Under Biden Have Cost Average Americans)
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“Today you can borrow for 10 years at 4.4%. Instead, you’re choosing to borrow at 5.4%,” Kennedy said. “That makes no sense!”
“Market participants believe that short-term interest rates will come down, and they will come down to a level substantially below the current 10-year,” Yellen responded.
The current ten-year borrowing rate for Treasury bonds is 4.35%, which is the lowest it has been in roughly three weeks, according to Trading Economics.
U.S. Secretary of the Treasury Janet Yellen holds a press conference ahead of the G7 Finance Minister and Central Bank Governors’ Meeting in Stresa, Italy, May 23, 2024. REUTERS/Massimo Pinca
“You announced last November … that we have decided to start issuing an inordinately large amounts of short-term debt, didn’t you?” Kennedy asked, to which Yellen answered affirmatively.
“Because of the inverted yield curve, that means that you’re gonna pay more in interest on short-term debt than say 10-year debt,” the senator said. “Now that’s a fact. You can go check the numbers of Treasuries yesterday. First, that costs taxpayers a lot more money in the interest. And number two, you’re working at cross purposes with the Federal Reserve because what you’re doing is stimulating the market. You’re pumping money into the economy and Jay Powell’s over here beavering away trying to reduce inflation. And you’re beavering away trying to increase it.”
Yellen appeared to begin to dispute Kennedy’s claims but he continued, talking over her.
“By paying an interest rate that is 100 basis points higher than you would have to pay,” he said. “And the only reason I can figure that y’all are doing that is, is to try to give the economy a sugar high five months before an election. Why else would anybody want to borrow at 5% when you can borrow at 4%?”
The seal of the on the US Treasury Department building is seen in Washington, DC, January 19, 2023. (Photo by SAUL LOEB/AFP via Getty Images)
“Well, there is a good reason that investors are willing to accept just over 4% on a 10-year Treasury bond when they can earn 5.4% on a one-year Treasury bill,” Kennedy said.
Kennedy specified he’s concerned about taxpayers rather than investors, but Yellen said the principle is the same for both.
“You’re borrowing at 5% when you could borrow at 4% to deficit spend. And it makes absolutely no sense why you would do that other than to try and artificially stimulate the economy and help Joe Biden get reelected,” Kennedy said.
“We’re not trying to time the market. We have a policy that we wanna hold the issuance of short-term bills in line with recommendations of the Treasury Borrowing Advisory Committee,” Yellen said.
Federal Reserve Chair Jerome Powell listens as U.S. Secretary of the Treasury Janet Yellen presides over a meeting of the Financial Stability Oversight Council at the Treasury Department on May 10, 2024, in Washington, DC. (Photo by Kent Nishimura/Getty Images)
Average interest rates on credit cards have also spiked recently, increasing from 14.56% in February 2022 to 21.47% as of November 2023. Americans’ credit card debt rose by $143 billion in 2023, reaching over $1 trillion in total.
“My mama didn’t raise a fool and if she did, it was one of my brothers,” Kennedy said, restating his assertion that Yellen is attempting to help Biden win, but the Treasury secretary denied that short-term debt borrowing gives the economy a “sugar high.”
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