By Simon Johnson.  This post comprises the opening paragraphs of my column today on Bloomberg; the rest is available here: http://www.bloomberg.com/news/2011-04-19/fiscal-conservatives-dodge-10-trillion-debt-simon-johnson.html

Washington is filled with self- congratulation this week, with Republicans claiming that they have opened serious discussion of the U.S. budget deficit and President Barack Obama’s proponents arguing that his counterblast last Wednesday will win the day.

The reality is that neither side has come to grips with the most basic of our harsh fiscal realities.

Start with the facts as provided by the nonpartisan Congressional Budget Office. Compare the CBO’s budget forecast for January 2008, before the outbreak of serious financial crisis in the fall of that year, with its latest version from January 2011. The relevant line is “debt held by the public at the end of the year,” meaning net federal government debt held by the private sector, which excludes government agency holdings of government debt.

In early 2008, the CBO projected that debt as a percent of gross domestic product would fall from 36.8 percent to 22.6 percent at the end of 2018. In contrast, the latest CBO forecast has debt soaring to 75.3 percent of GDP in 2018.

What caused this stunning reversal, which in dollar terms works out to a $10 trillion swing for end-year 2018 debt, from $5.1 trillion to $15.8 trillion?

To read the rest of this post, click here.

By Simon Johnson

In most industrialized countries, attention now shifts to some form of “fiscal austerity” – meaning the need to bring budget deficits under control.  In the UK, for example, there is an active debate between those on the right of the political spectrum (who want more cuts sooner) and those to the left (who would rather delay cuts as much as possible).  There is a similar discussion across the European continent – although the precise terms of the debate depend on exactly which party was most profligate during the long boom of the 2000s.

The United States stands out as quite different.  No one is yet seriously proposing to address our underlying budget issues.  There are certainly people who claim to be “fiscal conservatives” – some of the right and some on the left – but none can yet be taken seriously.  The implications are very bad for our fiscal future. Continue reading “There Are No Fiscal Conservatives In The United States” →