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Testimony

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


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.

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