Designated Chairman of the Federal Reserve Kevin Warsh he will face an unprecedented challenge if confirmed as the US faces its biggest budget crisis since the aftermath of World War II.

The US is currently struggling with a major budget crisis, reminiscent of the post-World War II era. One in five dollars collected in taxes is now consumed by interest payments, and the Congressional Budget Office (CBO) predicts that by 2035, these payments will exceed Medicare spending.

According to the report for Fortunately, the situation could get worse if interest rates rise, causing higher costs for every new trillion in borrowing and pushing deficits on an even faster path. president donald trump has spoken out on the issue, advocating that the Fed lower rates primarily to control rising interest costs.

Outstanding economist John Cochrane of Stanford’s Hoover Institution told the outlet that debt interest costs will be a major point of contention between the Fed and the administration. He added that any administration would refuse to raise rates or even keep them at current levels.

However, if the Fed cuts rates as Trump demands, the budget situation could improve in the short term. But this approach could also lead to higher inflation and the need to refinance loans at a higher cost.

The Treasury will eventually have to choose safety and extend the maturity profile of US debt, potentially worsening the interest situation, Fortune reports.

Why it matters: Regardless of the approach taken by Warsh, the US faces a challenging fiscal future. The best long-term solution, some say, is to fight inflation at all costs, a move that could make Warsh a target of presidential criticism.

The Federal Reserve’s decision under Warsh’s leadership will have far-reaching implications for the US economy, particularly the national debt and interest rates.

The balancing act between controlling inflation and managing the national debt will define Warsh’s tenure and the nation’s fiscal health.

Image: Shutterstock/MDart10

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This article Warsh would enter the Fed facing a $31 trillion federal debt originally appeared Benzinga.com

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