Now he tells us. The Fed chairman, Jerome Powell, is warning that America’s fiscal path is “unsustainable” and urging a course correction now that the national debt has surged above $36 trillion. It’s hard to gainsay Mr. Powell. Even so, is this the same Fed chairman who cheered on the Democrats as they borrowed trillions for stimulus spending? Even as the economy was already recovering from the pandemic, sparking the Biden wave of inflation?

The “federal budget is on an unsustainable path,” the chairman says now, even if the “debt is not at an unsustainable level.” He advises that “we don’t need to pay the debt down. We don’t need to balance the budget. We just need the economy to grow faster than the debt.” Missing from his analysis  is an acknowledgment that today’s crisis of debt — which is intertwined with the crisis of inflation — is a symptom of the age of fiat money. 

Running up debt on the scale of today’s Great Dismal Swamp of red ink, after all, would have been impossible before America defaulted to fiat money. Until 1971, dollars were convertible to gold at a rate defined by law. The discipline needed to maintain that link to gold prevented the excessive spending, and borrowing, undertaken by Uncle Sam since then. As the debt has soared, the dollar’s value has plunged to less than a 2,600th of an ounce of gold.

That’s why the right way to address America’s debt debacle will require a restoration of sound money. A balanced budget, aided in part by the kind of spending cuts envisioned by the Musk-Ramaswamy Department of Government Efficiency, is a sine qua non for achieving this goal. The timing of Mr. Powell’s debt warning suggests that he is more concerned about heading off the renewal of President Trump’s tax cuts. 

The chairman’s cautionary words, as the Hill reports, come “as Republicans ready for an intraparty battle over the potential fiscal impact of massive tax cuts in Congress.” The economic damage of raising taxes, though, appears to be lost on Mr. Powell, who seems to be attempting to wade into a policy debate that is best left to elected lawmakers. Faster growth, after all, will be critical if America is ever to outpace its astronomical debt.

And if the superficial fiscal implications of tax cuts give Mr. Powell the fantods, that’s a contrast to his enthusiasm for federal overspending. Back in October 2020, while the economy had already started to recover from the pandemic and Congress was debating whether a second stimulus was needed, the chairman crooned that “even if policy actions ultimately prove to be greater than needed, they will not go to waste.”

The result was a largely Democrat-backed bill lavishing $900 billion in Covid “relief” — including $600 stimulus payments — in December 2020. That spending helped lay the groundwork for the Biden inflation spiral. That was a prelude to the even more egregious $1.9 trillion stimulus bill signed by Mr. Biden in March 2021. The economy was already on the road to recovery and there was debate in Congress over whether the spending was needed.

Secretary Summers was among those warning at the time that the federal largesse could reawaken the long-dormant threat of inflation. Not so Mr. Powell. “I’m reluctant to get into what is clearly a very active debate,” he said with a straight face when asked in February 2021 about the prospect of federal stimulus spending despite the concerns about inflation. Yet he added that “it is the essential tool for this situation.”

Mr. Powell added that “I really do not expect we’ll be in a situation where inflation rises to troublesome levels.” And even if the economy was recuperating, he groused that “there’s a long way to go.” The inflation triggered by this overspending went on to propel Trump’s victory. That suggests the wisdom of Trump and the GOP prioritizing honest money to tame inflation and debt — and for them to look askance at Mr. Powell’s emergence as a fiscal hawk.