IMF sounds alarm on US debt: ‘Something will have to give’
The International Monetary Fund warned the United States on Tuesday that the government’s rampant spending and growing national debt is not sustainable and could threaten the global economy.
“Something will have to give,” the Washingtonbased nonpartisan financial agency of the United Nations warned, despite signs of economic growth.
In its latest World Economic Outlook, published twice a year, the IMF warned Tuesday that the U.S. national debt and fiscal deficit threaten to send sky-high inflation levels even higher.
The IMF said the U.S. federal budget deficit grew from $1.4 trillion in fiscal 2022 to $1.7 trillion last year. The debt, which surpassed $34 trillion, is on track to exceed $45.7 trillion within a decade, according to projections by the Congressional Budget Office.
“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,” according to the IMF.
“This raises short-term risks to the disinflation process, as well as longerterm fiscal and financial stability risks for the global economy since it risks pushing up global funding costs.”
As Congress voted last spring to suspend the debt limit and trillions of U.S. dollars have been spent on infrastructure, COVID-19 relief and aid to Ukraine since President Joe Biden took office, the Biden administration blames the country’s ballooning debt on former President Donald Trump.
“The Trump tax cuts added $2 trillion to the debt with unpaid giveaways skewed to the wealthy and big corporations and now congressional Republicans are proposing another $5.5 trillion in tax cuts skewed to the rich, while raising taxes on millions of middle-class families,” White House spokesperson Michael Kikukawa told The New York Post.
Despite inflation and growing debt, the IMF praised U.S. economic growth. The IMF projects the U.S. economy will grow 2.7% this year, which is up 0.6% from January. Last year, the U.S. added 2.7 million jobs.
“The strong recent performance of the United States reflects robust productivity and employment growth, but also strong demand in an economy that remains overheated,” said Pierre-Olivier Gourinchas, the IMF’s chief economist.
“This calls for a cautious and gradual approach to easing by the Federal Reserve.”