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Flirting with Disaster
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Flirting with Disaster

Solving the Federal Debt Crisis

Simon Johnson
PIIE, 2013
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Economist Simon Johnson succinctly outlines the danger of excessive public spending cuts to the US economy. He proposes progressive policies that he suggests could lead the US economy back toward sustainable growth and increased federal revenues. Although always politically neutral, getAbstract advocates this worthy report as a subject for debate among scholars as well as members of the executive and legislative branches of government.

Summary

The United States is not experiencing a fiscal crisis – for now. The nation is enjoying some “fiscal space” due to strong global demand for US government securities. The Federal Reserve’s quantitative easing lowered long-term interest rates, and US Treasuries offer a stable investment for overseas savers. Thus, the US economic outlook appears rosy for the next 10 years. Beyond that horizon, turmoil may unfold. Rising health care costs present an untenable situation for America’s aging populace and shrinking labor force. To stave off a future disaster, policy makers need to restructure medical costs.

To stymie a future crisis, America needs to make “a longer...

About the Author

Simon Johnson is the Ronald A. Kurtz professor of entrepreneurship at MIT’s Sloan School of Management.

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