Today, the Senate Budget Committee held a hearing entitled “The Global Economy: Outlook, Risks, and Implications for Policy,” to consider the economic situation facing the nations around the world, and what solutions may be pursued to alleviate the global financial crisis. This hearing comes on the heels of a hearing held by the Committee yesterday on the federal response to the housing and financial crisis.

Testifying before the Committee were the following witnesses:  

  • Dr. Simon Johnson, Ronald Kurtz Professor of Entrepreneurship, MIT Sloan School of Management and Senior Fellow, Peterson Institute for International Economics;
  • Dr. Brad Setser, Fellow for Geoeconomics, The Council on Foreign Relations
  • Tim Adams, Managing Director, The Lindsey Group  

The witnesses pointed to the recent forecast announced by the International Monetary Fund (IMF) in which it predicted that global activity will expand by only 0.5 percent in 2009, down from 3.4 percent in 2008 and 5.2 percent in 2007, as the sharp slowdown in economic activity continues to affect both developed and developing economies worldwide. The witnesses emphasized that global contractions in output and trade, and a reversal of global capital flows will prolong the global recession, though they differed with respect to the duration and degree of severity of the recession.

The witnesses indicated that providing additional fiscal stimulus coordinated between global governments, stabilizing and restoring confidence in the banking sector, strengthening the IMF and supporting development assistance, and addressing global imbalances are necessary to combat the global economic downturn.