Peterson Institute publications
The Peterson Institute for International Economics is a private, nonprofit, nonpartisan
research institution devoted to the study of international economic policy. More › ›
RSS News Feed Search


Flirting with Disaster: Solving the Federal Debt Crisis

by Simon Johnson, Peterson Institute for International Economics

Testimony submitted to Joint Economic Committee of Congress, hearing on "Flirting with Disaster: Solving the Federal Debt Crisis."
March 14, 2013

View full document [pdf]

The disaster with which the United States now flirts is that it will inflict upon itself unnecessary and damaging austerity. A sudden move towards further tightening fiscal policy would undermine US economic recovery and could destabilize financial markets. There is no meaningful evidence that the United States needs to cut federal deficits dramatically this year or next or even over the next five years. The ongoing sequester is a perfect example of how not to manage fiscal policy. Policymakers should instead be building an economy within which federal revenue can be robust and public spending growth can be contained over the next decade. A separate, but very important, issue is how to limit healthcare spending as a percent of GDP over the next 20 to 50 years.


Policy Brief 13-21: Lehman Died, Bagehot Lives: Why Did the Fed and Treasury Let a Major Wall Street Bank Fail? September 2013

Op-ed: Misconceptions About Fed's Bond Buying September 2, 2013

Op-ed: After Bernanke, Make Unconventional Policy the Norm July 15, 2013

Testimony: The Fed at 100: Can Monetary Policy Close the Growth Gap and Promote a Sound Dollar? April 18, 2013

Op-ed: How the IMF Can Help Cut US Joblessness February 4, 2013

Policy Brief 12-25: Currency Manipulation, the US Economy, and the Global Economic Order December 2012

Policy Brief 12-15: Restoring Fiscal Equilibrium in the United States June 2012

Book: The Global Outlook for Government Debt over the Next 25 Years: Implications for the Economy and Public Policy June 2011

Book: The Long-Term International Economic Position of the United States April 2009

Article: The Dollar and the Deficits: How Washington Can Prevent the Next Crisis November 2009

Speech: Rescuing and Rebuilding the US Economy: A Progress Report July 17, 2009

Book: US Pension Reform: Lessons from Other Countries February 2009

Testimony: The Dollar and the US Economy July 24, 2008

Testimony: Why Deficits Matter: The International Dimension January 23, 2007

Book: Accountability and Oversight of US Exchange Rate Policy June 2008

Op-ed: Bubbles Are Getting Blown Out of All Proportion September 8, 2004

Book: The United States as a Debtor Nation September 2005