Testimony before the Senate Budget Committee hearing, “A Status Report on the U.S. Economy.”

Peterson-Institute-LogoTestimony before the Senate Budget Committee hearing, “A Status Report on the U.S. Economy.”

Short-term Prospects
The global economy continues to improve, although at a disappointing pace. Sharp recessions traditionally produce rapid recoveries, but the damage wrought by the disruption of global credit in fall 2008 is far in excess of anything we have seen since the 1930s. This could be the slowest recovery of the post-war period.

Contingent Liabilities from the Financial Sector
The scale and severity of the recent recession was due to the nature of excessive risk-taking at the heart of the world’s financial system, in the United States and Western Europe.

Risks of a Fiscal Crisis
Seen in a comparative perspective, our budget issues are serious but not severe and—relative to other industrialized countries currently under pressure—we have plenty of time to deal with them. Fears of an immediate budget crisis in the United States should not be exaggerated, although we do need fiscal consolidation over the next decade—a combination of tax reform and changes to future Medicare spending.

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Source: Simon Johnson | Peterson Institute for International Economics
Photo: Peterson Institute for International Economics