IMF Warns the U.S. About Economic Risks and the Looming “Fiscal Cliff”
On the eve of America’s birthday, the IMF warned about the fragile U.S. recovery that threatens not only America’s, but the world’s, economy.
If most Americans think about the IMF at all, they think of the organization bailing out troubled economies and enforcing tough austerity measures in distant countries. But the IMF actually does “surveillance consultations” each year for more than 100 of its 188 member nations.
July 3 was the United States’ turn to receive an assessment from the IMF. (And no, we’re not talking about the Impossible Mission Force of Mission Impossible fame, though judging by world economic conditions today, that name might be appropriate. IMF in this case stands for the International Monetary Fund.)
“Recovery remains tepid”
Here is part of the concluding statement of the 2012 IMF Mission to the United States of America released July 3:
“The U.S. recovery remains tepid and subject to elevated downside risks, in light of financial strains in the euro area and uncertainty over domestic fiscal plans. Against this background, policies need to decisively tackle medium-term challenges while using the available room to support the recovery. Specifically, it is critical to ensure a pace of fiscal adjustment in the short run that is supportive of the recovery, removing the threat of a very large fiscal adjustment in 2013, and to adopt a credible medium-term plan restoring fiscal sustainability.”
This summary was followed by more detailed analysis and warnings.
Telegraph.com reported July 3: “The fund added its voice to a rising chorus of concern that sharp political divides in Washington mean that the world’s biggest economy will fall off what has [been] dubbed a ‘fiscal cliff’ in less than six months time.
“As it stands, the expiration of George W Bush’s tax cuts on December 31, and the start of more than $1 trillion in spending cuts in January, mean the US is facing a severe fiscal headwind just as growth is slowing.”
The New York Times also noted the “sharp warning for Washington: avoid the fiscal cliff at the end of the year, when the Bush-era tax cuts expire and mandatory spending cuts across the government come into effect. The sudden shock could be enough to put the country back into recession, the fund warned, with global repercussions.”
The New York Times report continued, “Christine Lagarde, the fund’s managing director, also said that Congress should ‘promptly’ raise the debt ceiling to avoid spooking the global debt markets and raising the country’s borrowing costs. The government is expected to hit its statutory borrowing limit late this year.
“Should policy makers fail to lessen the end-of-the-year fiscal blow and raise the debt ceiling, ‘the domestic effects would be severe, with negative spillovers to the rest of the world,’ warned Ms. Lagarde.”
Americans are used to giving warnings to the rest of the world, and some Americans don’t take kindly to being the brunt of warnings. Perhaps it is a case of turnabout is fair play.
Last month President Barack Obama criticized Germany’s handling of the eurozone crisis and demanded that European leaders take action. Though he said he wasn’t scolding European leaders, his remarks were not well received (“Debt Crisis: Barack Obama Demands Action as Eurozone Leaders Ponder Spanish Bank Rescue,” June 8, 2012).
Other world leaders piled on the Europeans at the G20 summit.
“At the G20 summit in Mexico Jose Manuel Barroso, the President of the European Commission, finally lost it. Asked by a Canadian journalist to explain why North Americans should ‘risk their assets to help Europe’ … , Barroso replied:
“‘Frankly, we are not here to receive lessons in terms of democracy or in terms of how to handle the economy. This crisis was not originated in Europe … seeing as you mention North America, this crisis originated in North America and much of our financial sector was contaminated by, how can I put it, unorthodox practices, from some sectors of the financial market’” (Telegraph.com, June 19, 2012).
The truth is, there is plenty of blame to go around. The Europeans, of course, contributed to the world crisis, but America cannot escape its own responsibility for the mess.
Some Americans blame their financial problems on the euro crisis or the slowing of the white-hot growth in China and other areas. But most of America’s problems are homegrown. In fact, it seems the cushion of having been the strongest economy and the world’s reserve currency is what has allowed America to be considered a safe haven from eurozone sovereign debt risks. In reality, though, America’s debt resembles the debt-laden countries of southern Europe.
America’s incredible material wealth and rise to superpower status are the result of God’s blessing, yet many Americans today take their abundance and place in the world for granted. With power and wealth have come pride and feelings of entitlement. Instead of thankfulness, greed, arrogance, corruption and every form of selfishness have abounded.
As America has gone deeper in debt, she has forgotten God’s warning that “the borrower is servant to the lender” (Proverbs 22:7).
God also warns that eventually those who ignore His laws and who succumb to the downward spiral of immorality will face increasing waves of curses (Deuteronomy 28:15-68).
Is America setting herself up for these deeper troubles? Whether or not America avoids the impending fiscal cliff, is she already tumbling over the edge of the moral cliff?
You need to learn more about what God has done for America, what He expects and what we can individually do to seek His blessings and avoid the curses He warns about. See the “America in Prophecy” section.