The IMF's most recent World Economic Outlook has a very helpful chapter looking at six case studies on countries who have dealt with a high debt burden. However, unlike our "Fiscal Turnarounds" paper from a few years ago, not all of these cases are success stories (and only one case overlaps with our paper).
The United States is not the only country in the world who has, or is, facing fiscal problems. Our neighbor to the north faced some severe fiscal problems during the mid-1990s when they had high budget deficits and when the Mexican peso crisis seemed to make Canada the next focus of international worries.
The Concord Coalition has just unveiled a new paper, authored by Edmund Andrews, Joe Minarik, and Diane Lim Rodgers, called "Not Just Their Problem: The Euro Debt Crisis and U.S. Fiscal Policy," shedding some light on our fiscal outlook in an international context.
The American Association of Retired Persons (AARP) hosted an event entitled "Work, Retirement Age, and Fiscal Sustainability in an Aging World." Two professionals in the field of pension public policy and fiscal sustainability led the discussion, providing an international perspective on the difficulty that population aging is posing for budgets across the world.
A new working paper by four authors at the International Monetary Fund takes a look at fiscal rules around the world. The Peterson-Pew Commission on Budget Reform put out a more general discussion of fiscal rules in December, but the IMF specifically looks at similiarities and differences between specific regimes.
As Senator Mark Warner pointed out last week in the Christian Science Monitor, the United States is still in a position where long-term debt reduction is much easier than in several European countries now in fiscal crisis.
Steep budget cuts are linked to recession and higher unemployment in Europe, argue several commentators (see here for example). Are they right? Certainly, some countries have struggled economically when reducing deficits before their economies have made a recovery.
The news that Britain has entered into a double-dip recession touched off a fierce debate last week over the role of austerity in the country's downturn.
Europe's worsening debt crisis--notably Italy's--should serve as a warning to the United States of what can happen to an otherwise steady, solvent economy whose debt is too high. In short, when debt gets so precariously high that interest payments become a very large budget line, debt markets can expand a slight decrease of confidence into a significant increase in interest rates. From there, the crisis can quickly descend into a national failure to refinance expiring bonds, and then possibly into national bankruptcy and default.