IMF Warns Biden’s Fiscal Profligacy Poses “Significant Risks” To Global Economy ‘In Great Election Year’
The IMF said the the quiet part out loud today (admittedly wrapped in 100s of pages of PhD-ese) in their benchmark Fiscal Monitor this morning: pointing out that America’s recent economic performance is partially the result of the country’s unsustainable borrowing, and that the US’ massive fiscal deficits have stoked inflation and pose “significant risks” for the global economy.
“The exceptional recent performance of the United States is certainly impressive and a major driver of global growth, but it reflects strong demand factors as well, including a fiscal stance that is out of line with long-term fiscal sustainability,” the IMF wrote in its latest World Economic Outlook. They added that: “Fiscal policy developments in major economies, notably in the United States, have implications for global financing conditions.”
The IMF said the US had exhibited “remarkably large fiscal slippages”, with the fiscal deficit hitting 8.8 per cent of GDP last year – more than double the 4.1 per cent deficit figure recorded for 2022, calculating that ‘Bidenomics’ (and its Inflation Reduction Act) had contributed 0.5 percentage points to core inflation (due to its fiscal profligacy).
Who could have seen that coming?
The fund further said in its Fiscal Monitor report that it expected the US to record a deficit of 7.1 per cent next year – more than three times the average for other advanced economies. It also raised concerns over Chinese government debt as Beijing copes with weak demand and a housing crisis.
The US and China were among four countries the fund named that “critically need to take policy action to address fundamental imbalances between spending and revenues.”
The others were the UK and Italy.
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