Allan Meltzer, a distinguished visiting fellow at the Hoover Institution, testified before the US Senate’s Joint Economic Committee. In his testimony, Meltzer notes that there is no shortage of money and liquidity and that the Federal Reserve has pushed and prodded market interest rates to the lowest levels ever achieved. But today’s deficits and debt raise concerns about future tax rates. We have ample warning that we are on an unsustainable path. We don’t know when a crisis will occur, but we should not wait to learn whether it does. Meltzer stated that one part of the right answer is to reach a long-term budget agreement that brings government spending below sustained GDP growth. Meltzer’s testimony begins at around 14:00 minutes.
Meltzer is the Allan H. Meltzer University Professor of Political Economy at the Tepper School of Business at Carnegie Mellon University. His teaching and research interests include the history of US monetary policy, size of government, macroeconomics, and the relation of money to inflation and unemployment in open and closed economies. Professor Meltzer has served as a consultant on economic policy for the US Congress, the US Treasury, the Federal Reserve, the World Bank, and the US and foreign governments and was chair of the International Financial Institution Advisory Commission. He was recently named the Distinguished Fellow for 2011 by the American Council for Capital Formation.