The Fiscal Policy Debate is Out of Whack
Posted at 1:30 p.m. on June 10
Simon Johnson warns that as we move beyond the 2008 financial crisis, the debate over fiscal policy and the debt ceiling demonstrates that lawmakers have forgotten the dark days.
“We have lost our grip on what is appropriate and inappropriate in discussing fiscal-policy choices. A shock that plunges the economy of any industrialized country into a recession will be met by automatic fiscal responses that seek to counteract the effect… there are also important discretionary fiscal-policy choices that must be made in a deep recession.”
“Regardless of party affiliation, the discussion in public and in private in late 2008 was about the appropriate form and scale of support for the economy… There was no serious resistance to the notion that we were confronting the biggest crisis since World War II.”