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Flirting with Disaster
Report

Flirting with Disaster

Solving the Federal Debt Crisis

Simon Johnson
PIIE, 2013
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Editorial Rating

7

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Recommendation

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.

Take-Aways

  • The United States is not experiencing a fiscal crisis – for the time being. Due to buoyant demand for Treasury securities, the economy looks safe for the next decade.
  • However, rising health care costs present an untenable situation for America’s aging populace and shrinking labor force. Without recourse, this could destabilize the federal balance sheet.
  • Since 2000, large tax cuts, two overseas wars and growing Medicare expenses have exacerbated the public deficit. Tax revenues have fallen, while interest payments and discretionary expenditures – including the stimulus program – have risen.

About the Author

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

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