It’s Hard To Take The Fiscal Hawks Seriously: Testimony To The Senate Budget Committee

By Simon Johnson

Most of the discussion of federal budget issues today is misdirected. The shorter run issues are dominated by the likelihood of another financial crisis – and the implications that would have for the budget deficit – but no “fiscal hawks” even want to acknowledge the issue. It is very hard to take anyone seriously if they refuse to look at these (uncontroversial) numbers. Medium term, we obviously need tax reform. The good news, in a sense, is that the US has an antiquated and inefficient tax system; it would not be hard to improve how this operates, raising revenue and actually reducing distortion. Longer term, Medicare is obviously a tough problem with no easy solutions yet in sight. But the argument “just cut entitlements” cannot be taken seriously.