Judy Shelton: It's "Day 1" Of The Reckoning As US' Unsustainable Fiscal Path Runs Out

**Judy Shelton** (0:00)
There must be a limit to how many years you can have everyone testify before Congress that we're on an unsustainable fiscal path. It has for so long been put off as some kind of a long-term problem. And I think we finally hit day one of the long-term. And I think it's imperative that we change the arc.

**Adam Taggart** (0:30)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. From tariffs to tax cuts to deregulation to budget reductions to a potential sovereign wealth fund, the new Trump administration is moving aggressively to redesign the way America finances itself. Are these much needed reforms that will put the American economy on a more secure and sustainable footing? Or could they risk resulting in misguided chaos? To find out, today we've got the great fortune to welcome to the program Dr. Judy Shelton, economist, author, senior fellow at the Independent Institute, and the author is Good as Gold, How to Unleash the Power of Sound Money. She's a particularly qualified expert on today's topic because she served as an economic advisor to President Trump during his first term and was nominated by him in 2020 for the Federal Reserve. Dr. Shelton, thank you so much for joining us today.

**Judy Shelton** (1:23)
My pleasure. Thank you.

**Adam Taggart** (1:25)
Well, look, it's a real honor to have you join here. You are an exceptionally qualified person for the questions that I want to talk about today. If we can, let's start at a high level. I sort of have this deliberately broad kickoff question. I ask most of my guests. I'm actually going to tweak it a bit for you. What's your current assessment of the solvency of the United States? How sustainable or not are its debts, its underfunded liabilities, and its annual deficits?

**Judy Shelton** (1:54)
I think we're really at a pivot point. I started my career at Stanford, at the Hoover Institution, looking at the internal financial and monetary condition of the Soviet Union. I know that dates me, but I was even shocked after putting on the green-eye shade of an accountant as my approach in looking at the internal budget of the Soviet Union. There was no other conclusion than that this country was going bankrupt. Now, could it happen in the US?
There must be a limit to how many years you can have everyone testify before Congress that we're on an unsustainable fiscal path. I've heard Chair Jerome Powell of the Federal Reserve say exactly that on many occasions in testifying semiannually before Congress. It has for so long been put off as some kind of a long-term problem. I think we finally hit day one of the long-term. I think it's imperative that we change the arc, and especially with these unexpectedly high interest rates. And now it's a cliché, but nevertheless true to say that we're spending more on paying interest on our national debt than on national defense. So clearly, that says that we've reached the point where we must do radical things to get to a balanced budget.

**Adam Taggart** (3:36)
Okay. To get to a balanced budget. Okay. Well, we'll talk about that in a bit.
So I think, I don't know anybody in the Trump administration. You still may, and actually, I know you advised the Trump administration and the first administration. Are you still advising them actively now?

**Judy Shelton** (3:53)
Well, even when you say I advised, I was part of the first administration, but my duties were in London, and I was President Trump's selection. It had to be approved by the Senate to represent the United States at a multinational development bank called the European Bank for Reconstruction and Development. The United States is the largest holder of capital in that bank. We put up 10 percent. We started it in the immediate aftermath of the dissolution of the Soviet Union. I had worked on the transition team in 2016 for President Trump, who was incoming. I was a leader advisor assigned to the Treasury for international affairs. In that sense, I also advised the Trump administration.
I sent memos. I wasn't whispering in the president's ears, but whenever asked to comment on different policies involving currency manipulation and or tariffs. Of course, I weighed in tax and the effort to reduce the regulatory burden on the private sector. So I was exposed to all that. I'm in close touch with colleagues from that period, but I wouldn't say that I'm advising the president today.

**Adam Taggart** (5:21)
Okay. The reason why I mentioned that, one was A to C if you were getting any sort of mainline information from them. But also, I imagine that the Trump administration, Trump himself probably would say right now, hey, that's why I'm making all these radical changes right now, is I'm actually trying to do things differently and to try to get us back from the precipice. We'll talk a little bit about whether you think they're pursuing the right course of action on that or not. Before we get to that, though.