On Friday, the world’s central bankers gathered in Jackson Hole, Wyoming, for an annual conference, and heard Federal Reserve Chairman Ben Bernanke take some not-so-veiled shots at Congress. Perhaps most notably, Bernanke urged policymakers to approve stimulus measures, and reject calls for short-term austerity.
Yesterday, the attendees heard from International Monetary Fund Chief Christine Lagarde, who also had some good advice.
The world economic recovery is in new peril of derailing, the head of the International Monetary Fund said Saturday as she called on leaders in the United States and Europe to take aggressive and immediate action to address new cracks appearing in the global economy.
The global economy is in a “dangerous new phase,” said Christine Lagarde, the IMF managing director, speaking at a conference of top central bankers and economists. The world is endangered by “a growing sense that policymakers do not have the conviction, or simply are not willing, to take the decisions that are needed.”
More specifically, Lagarde, urging the relevant players to “act boldly,” said governments on both sides of the Atlantic should follow a familiar path: address long-term fiscal issues while at the same time, focusing on job creation and economic growth in the short term. In the U.S., she also stressed the importance of aggressive efforts to improve the housing market, assisting underwater homeowners.
Lagarde, like Bernanke and sane people everywhere, dismissed talk of “more upfront drastic belt-tightening.”
Of course, here in the U.S., Republicans’ only real demand is for “more upfront drastic belt-tightening.”
The point here is not that Lagarde’s vision is somehow new and unique. Rather, the point is, just the opposite is true. The debate is so painfully frustrating precisely because Lagarde’s advice is, at least in the larger sense, identical to what economists, business leaders, the financial industry, the Fed, and the White House have all been saying for quite a while. While the details obviously matter a great deal, the broad strokes of the way forward are pretty obvious: focusing on boosting the economy in the short term, and focus on gradually improving the fiscal picture in the long term.
It is, however, almost impossible to achieve in Washington, because in the alternate universe inhabited by congressional Republicans, such an approach is wholly unacceptable.
Lagarde believes the world is endangered by “a growing sense that policymakers do not have the conviction, or simply are not willing, to take the decisions that are needed”? When describing the dominant party in the U.S. Congress, she’s right.