By Simon Johnson

The newly standard line from big global banks has two components – as seen clearly, for example, in the statements of Jamie Dimon (JP Morgan Chase) and Bob Diamond (Barclays in the UK) at Davos last weekend.  First, if you regulate us, we’ll move to other countries.  And second, the public policy priority should not be banks, but rather the spending cuts needed to get budget deficits under control in the US, UK, and other industrialized countries.

This rhetoric is misleading at best.  At worst it represents a blatant attempt to effectively shakedown the public purse.

On Tuesday morning, in testimony to the Senate Budget Committee, I had an opportunity to confront this myth- making by the banks head-on and to suggest that the bankers’ logic is completely backwards. Continue reading “The Ruinous Fiscal Impact Of Big Banks” →

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.

Below is my testimony this week to the Senate Budget Committee on these issues.  (This link is to a pdf version; also see this page for my testimony to congressional committees over the past 2 years). Continue reading “It’s Hard To Take The Fiscal Hawks Seriously: Testimony To The Senate Budget Committee” →