NYTimes.com Article: America’s Red Ink

This article from NYTimes.com 
has been sent to you by tganesh@stlawu.edu.


IMF recommends "regime change" - for the US!  Sign of things to come?  Ganesh.

tganesh@stlawu.edu

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America’s Red Ink

January 12, 2004
 


 

The International Monetary Fund has long been accused of
failing to sound the alarm before countries with reckless
fiscal policies implode. So it was nice to see staff
members of the fund's Western Hemisphere department hold a
press conference last week to publicize one nation's
worrisome trends, which threaten foreign investors and the
global economy. 

Who was in for the scolding? Haiti? Argentina? Mexico? Not
exactly. It's the United States the fund is worried about.
An economic slowdown and President Bush's huge tax cuts
conspired to swing America's federal budget from a surplus
of 2.5 percent of gross domestic product in 2000 to a
deficit of some 4 percent in 2003. Add the states' own
budget shortfalls and the country's trade deficit, the
I.M.F. report notes, and the United States faces an
"unprecedented level of external debt for a large
industrial country." 

Robert Rubin, the former Treasury secretary, and Donald
Kohn, a Federal Reserve governor, have also railed against
the deficit in recent days. But there is something humbling
about hearing it from an international organization charged
with monitoring economies on the brink. 

In most countries, the I.M.F. is often viewed as America's
agent, preaching the inconvenient gospel of fiscal
discipline and austerity. There is a certain poignancy now
in having the I.M.F. preach the so-called "Washington
consensus" to Washington. 

The I.M.F. forcefully argues that the United States will
need to adjust taxes and spending to bring its finances
under control; the recovery alone won't do it. The fund's
report warns that America's profligacy and its voracious
appetite for credit will drive up interest rates around the
world, threatening the global economic recovery and
American productivity growth. 

Foreign investors are already selling the dollar in
reaction to Washington's fiscal recklessness, but the fund
warns that this selling could accelerate and create a
currency crisis. It also notes that present trends pose
dangers for the future of Medicare and Social Security. 

Most damning of all, the report attacks the "complicated
and nontransparent manner" in which the administration's
$1.7 trillion in tax cuts were enacted, designed as they
were to mask their true budgetary impact. The I.M.F.'s
frustration is understandable. The United States has
provided other nations with a terrible model of obfuscatory
governance. Congress and the Bush administration enacted
"phased in" tax cuts that were supposed to be retired in a
decade, accelerated their phasing in and then, after they
were priced under the assumption that they would fade away,
pledged to make them permanent. 

No wonder the rest of the world is appalled.


http://www.nytimes.com/2004/01/12/opinion/12MON2.html?ex=1074959743&ei=1&en=d1387ac9f1adcbdb


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