While austerity fans have become pretty quiet in the United States of late (outside those White House meetings with Senate Republicans), their policies continue to have baleful effects, to the point where the International Monetary Fund is becoming visibly impatient with the pointless self-destruction. Check out this report from the FT’s Robin Harding:
The International Monetary Fund denounced the tightening of US fiscal policy as “excessively rapid and ill-designed”, saying it will knock as much as 1.75 percentage points off growth this year.
In its annual economic check-up on the US, the IMF forecast growth of just 1.9 per cent this year and cut its 2014 outlook to 2.7 per cent from the 3 per cent it expected as recently as April.
It said that rapid tightening of fiscal policy – including tax rises and $85bn in across-the-board sequestration cuts to public spending – will take between 1.25 and 1.75 percentage points off growth this year.
“The IMF’s advice is toâ€‰.â€‰.â€‰.â€‰slow the fiscal adjustment this year – which would help sustain growth and job creation – but hurry up with putting in place a medium-term road map to restore long-run fiscal sustainability,” said Christine Lagarde, IMF managing director.
The IMF analysis suggested President Obama’s FY 2014 budget supplied a pretty good template for that “medium-term [fiscal] road map.” But it clearly considers continuation of sequestration a bizarre mistake. That’s probably because it is.