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Saturday, June 15, 2013

IMF Urges Repeal of 'Ill-Designed' Spending Cuts

In case you missed this, the IMF estimates that economic growth would be nearly double what it is now without the "excessively rapid and ill-designed" government spending cuts:

IMF Urges Washington to Repeal ‘Ill-Designed’ Spending Cuts, Reuters: The International Monetary Fund urged the United States on Friday to repeal sweeping government spending cuts and recommended that the Federal Reserve continue a bond-buying program through at least the end of the year.
In its annual check of the health of the U.S. economy, the IMF forecast economic growth would be a sluggish 1.9 percent this year. The IMF estimates growth would be as much as 1.75 percentage points higher if not for a rush to cut the government's budget deficit. ...
"The deficit reduction in 2013 has been excessively rapid and ill-designed," the IMF said. "These cuts should be replaced with a back-loaded mix of entitlement savings and new revenues."
The IMF warned cuts to education, science and infrastructure spending could reduce potential growth. ...
The Fund recommended that the U.S. Federal Reserve keep up its massive asset purchases at least through the end of the year to support the U.S. recovery, but should also prepare for a pull-back in the future. ...

The recovery of output and employment didn't have to be so slow. I'm not saying that reversing these policies (or replacing them with more aggressive fiscal policy measures) would have brought miracles, it was going to be a difficult recovery no matter what polices we pursued. But we certainly could have done better than we did, particularly on the fiscal policy front.

    Posted by on Saturday, June 15, 2013 at 08:44 AM in Economics, Fiscal Policy | Permalink  Comments (24)


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