U.S. Treasury Secretary Janet Yellen thinks Washington’s ballooning deficit is 'manageable,' but on one condition: the pace of borrowing can't exceed today's levels.

In an interview with CNBC, Yellen said high interest rates are making it harder for the government to manage its staggering $34.7 trillion deficit. But that shouldn’t threaten America’s fiscal position—not yet.

“If the debt is stabilized relative to the size of the economy, we’re in a reasonable place,” Yellen said. “The way I look at it is that we should be looking at the real interest cost of the debt. That’s really what the burden is.”

But the problem is there’s no guarantee that the government will rein in spending at current levels. In 2023, federal deficit spending broke yet another record, adding $1 trillion in debt roughly every 100 days.

The public’s share of the national debt is 97% of GDP, meaning that Washington’s deficit is almost as big as the U.S. economy. This wouldn’t be an immediate problem had it not been for the sharp rise in interest rates since 2022.

To Yellen’s point, the federal government is now spending more on interest payments than on national defense. During the 2024 fiscal year, net interest payments even exceeded government expenditure on healthcare.

Yellen’s silver lining is that the Biden administration is proposing to slash the deficit by $3 trillion over the next decade. But not everyone is convinced it’ll work.

Balancing the books is harder than it looks

The nonpartisan Peter G. Foundation believes the Biden administration’s deficit relief measures amount to nothing more than window dressing.

“While the administration’s proposals would reduce deficits relative to current law, federal spending would still outpace revenues over the period—causing the national debt to grow, albeit at a slower rate,” the foundation wrote.

Under the proposal, the public’s share of the debt would increase from 97% of GDP to nearly 106% in 2034—a hair below the record high of 106.1% set just after the Second World War.

There’s also no guarantee that a new administration would do a better job balancing the books. Presidential hopeful Donald Trump ran a historic national debt balance during his first term in office, much of which was accumulated before Covid.

According to the Committee for a Responsible Federal Budget, the national debt ballooned by $8.4 trillion under Trump’s watch.

By comparison, that’s nearly twice as big as what Americans currently owe in credit card debt, student debt, auto loans, and every other non-mortgage debt.

Regardless of who wins the presidential election, experts say the national debt is likely to grow for the foreseeable future.

“While a Republican sweep would involve an extension of the expiring tax cuts, for the most part, this would simply extend current policy (and the current effect on the deficit),” wrote Goldman Sachs analysts Alec Phillips and Tim Krupa.

“While a Democratic sweep would likely involve tax increases, much of this would likely go toward new spending,” they explained.