• Former top economic advisor Kevin Hassett cautions against using inflation as a deficit reduction tool
  • Core inflation has risen for five consecutive months, reaching 3.0% as of September 2025
  • Policy debate intensifies as stimulus proposals and government shutdown create fiscal uncertainty

Kevin Hassett, former chairman of the Council of Economic Advisers and National Economic Council director, issued a stark warning that attempting to use inflation to address the nation's deficit would put the United States "on the road to financial crisis." This caution comes amid persistent inflation that has exceeded the Federal Reserve's target and fueled contentious economic policy debates.

Hassett, representing the current administration in recent media appearances, has faced mounting questions about inflation's resurgence. The core inflation rate stood at 3.0% in September, marking five consecutive months of increases since May. Energy costs and service sector prices have shown particular strength, complicating the administration's economic messaging.

"You are on the road to financial crisis if this approach is adopted," Hassett said during a recent television interview, according to people familiar with his remarks. His comments reflect growing concern among economic traditionalists about discussions in some policy circles that view moderate inflation as a potential tool for reducing the real value of government debt.

The debate over deficit reduction strategies has intensified as some analysts point to recent surges in tax revenues as a preferable alternative to inflationary approaches. However, the ongoing federal government shutdown, now extending into late October, has created additional fiscal uncertainty and threatens to dampen GDP growth.

Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget, echoed concerns about inflationary deficit reduction, noting that while it might temporarily improve government balance sheets, it ultimately erodes household purchasing power. Data indicates average Americans have lost approximately $3,400 in purchasing power over four years due to inflation, with only partial recovery this year.

Efforts to reach Hassett for additional comment were unsuccessful Thursday. Administration officials have been navigating criticism over their handling of inflation data and government spending priorities, particularly as new stimulus proposals circulate within policy discussions.

The current economic landscape bears resemblance to historical episodes where countries attempted to inflate away debt burdens, often with damaging long-term consequences. International examples from Argentina to Turkey demonstrate the risks Hassett references, where initial attempts at fiscal relief through monetary debasement spiraled into full-blown financial crises.

Market participants remain particularly sensitive to inflation and deficit developments, with recent volatility in energy and financial sectors reflecting underlying concerns about fiscal sustainability. The combination of persistent inflation, ongoing government shutdown, and contentious policy debates creates a complex backdrop for economic decision-making.

Correction: An earlier version of this article misstated the duration of inflation increases. The core inflation rate has risen for five consecutive months, not six.