[FoRK] IMF: U.S. deficits threaten world finance

Contempt for Meatheads jbone at place.org
Thu Apr 15 11:59:20 PDT 2004

So not only are we the biggest threat to world peace under this 
misadministration --- we are also a serious threat to global economic 
stability due to the fiscal irresponsibility of these borrow-and-spend 
Big Government (Faux) "Conservatives." (I choke every time I have to 
use that word to describe these idiots.)

via Salon.

IMF: U.S. deficits threaten world finance

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By Martin Crutsinger


April 15, 2004  |  WASHINGTON (AP) -- Uncontrolled U.S. budget deficits 
would pose a serious threat to global prosperity in coming years as 
rising interest rates depress economic growth in the United States and 
around the world, the International Monetary Fund warned Wednesday.

The IMF released a new analysis that predicted if nothing is done to 
get control of the soaring U.S. deficits, it would shave global 
economic output by 4.2 percent by 2020 and reduce U.S. economic growth 
by 3.7 percent during the same period.

IMF economists said much of the adverse impact would occur because of 
increased borrowing demands in the United States to finance the budget 
deficit. This would drive up U.S. interest rates and interest rates in 
other countries as the global supply of available capital is reduced, 
they said.

"The rest of the world is affected seriously by the U.S. fiscal 
deficit," IMF chief economist Raghuram Rajan told reporters in a 
briefing on the new report.

The IMF's forecast that the U.S. budget deficit will be a significant 
drag on growth reflected what will occur if there is no improvement in 
the deficit, which the Bush administration projects will hit $521 
billion this year, a record in dollar terms, and show little 
improvement in coming years.

President Bush submitted a budget to Congress this year which projects 
that he will be able to cut the deficit in half over the next five 
years, reducing it to a shortfall of $237 billion in 2009.

The IMF said that if Bush is able to accomplish such a reduction in the 
budget deficit, it would significantly lower but not eliminate the 
adverse effects from the deficit on the U.S. and global economies.

It saw a long-run impact from such a budget reduction as reducing 
global economic output by 2.55 percent, compared to a reduction of 4.2 
percent under the worst-case scenario in which the deficit remains at 
the current record levels.

Under the Bush program to reduce the deficit, U.S. economic growth will 
be depressed by 1.88 percent in the long-term, compared to 3.68 percent 
under the more adverse deficit path.

However, the IMF said that if the United States decided to pursue more 
rapid deficit reduction, the adverse drag on growth would be greatly 
reduced to just 1.03 percent in the long-term in the United States and 
1.47 percent worldwide.


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