A debt crisis this way comes, IMF warns

posted at 10:30 am on June 18, 2011 by Tina Korbe

The International Monetary Fund yesterday issued a forecast that was even bleaker than its April outlook, Reuters reports.

The IMF, in its regular assessment of global economic prospects, said that bigger threats to growth had emerged since its previous report in April, citing the euro zone debt crisis and signs of overheating in emerging market economies.

The global lender forecast that U.S. gross domestic product would grow an anemic 2.5 percent this year and 2.7 percent in 2012. In its forecast just two months ago, it had expected 2.8 percent and 2.9 percent growth, respectively.

The outlook elsewhere was mixed. The IMF said it was slightly more optimistic about the euro area’s growth prospects this year, but a lack of political leadership in dealing with that crisis and the budget showdown in the United States could create major financial volatility in coming months.

The director of the IMF’s monetary and capital markets department called it “playing with fire” to postpone important, budget-related decisions, and the Reuters article specifically mentions the upcoming fight over whether to raise the debt ceiling. Without doubt, that fight is important — it desperately needs to net spending cuts and caps (and will only be a game of “chicken” if politicians on both sides of the aisle refuse to see that) — but it’s hard not to connect the IMF’s most recent warning to a certain preventable, lamentable “dereliction of duty.”

It has now been 779 days since Democrats have passed a budget — even though the law requires them to do just that. What if they had passed a budget that changed the debt trajectory of our country by April 15? What if they had passed a budget last year? Would the IMF have needed to issue so unnerving a prophecy? Would the debt limit debate loom with such heavy significance? A sound budget could have mitigated concerns, introduced greater certainty into the marketplace, prompted businesses to create jobs … The current situation, replete with unwelcome words from the IMF, could have been completely avoided.

Now, CQ reports, the latest iteration of Senate Budget Committee Chairman Kent Conrad’s (D-ND) secret budget is on the table. But Conrad seems unlikely to move definitively before Vice President Joe Biden’s deficit reduction talks yield a plan — because, Conrad says, “it wouldn’t make a whole lot of sense to go to markup before we see what they do, because they may very well need a budget resolution to enact what they want to do.” But a secret budget is barely better than no budget at all. After all, secrecy does little to assuage uncertainty.

Thanks to Democrats’ delays and the Biden talks’ debt-ceiling-debate target, the budget discussion will be rolled into the debt limit debate — and the IMF will continue to warn against “playing with fire.” But it didn’t have to be this way.


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Deliberate.

Malice.

Aforethought.

This is EXACTLY what the Statists have been planning for.

Tina, even though it has been 779 days since the Democrats have passed a budget, the Republican house has failed to do so either since they regained the majority.

Plenty of blame to go around.

turfmann on June 18, 2011 at 10:35 AM

It has now been 779 days since Democrats have passed a budget

Stop paying members of congress. when the budget deadlines pass, paychecks stop.

Daveyardbird on June 18, 2011 at 10:38 AM

The times are changing

Key West Reader on June 18, 2011 at 10:44 AM

I don’t know here. If Dems had done their job, and produced budgets on time, would we still be in the same boat? We are after all…talking about Dimocrats…aren’t we?!?!?!

capejasmine on June 18, 2011 at 10:44 AM

Dems con’t care about the IMF.

All they care about is getting re-elected in 2012 with “GOP is gonna throw Granny off the cliff!’ ads.

Wethal on June 18, 2011 at 10:44 AM

Thank you, President Obama.

Dr. Carlo Lombardi on June 18, 2011 at 10:44 AM

The Democratic budget plan is very simple. IGNORE IT!

GarandFan on June 18, 2011 at 10:48 AM

We know we have a range of socialists on the Dem side. A showdown will reveal what we have on the GOP side, from RINO to libertarian. Maybe we turn the Great Spending Machine into a toy?

cartooner on June 18, 2011 at 10:48 AM

Hillary Clinton wants to be Prez of the IMF. I would guess her primary goal would be to stop them from speaking the truth.

Buy Danish on June 18, 2011 at 10:50 AM

What if they had passed a budget that changed the debt trajectory of our country by April 15? What if they had passed a budget last year? Would the IMF have needed to issue so unnerving a prophecy?

What if the wanted us to go under? There was a time I wouold have laughed at such an absurd question -not any more.

Don L on June 18, 2011 at 10:52 AM

International Monetary Fund (IMF) has even less credibility and authority than the United Nations. They can be ignored.

The managing director of the IMF, until recently, was world-renowned hotel guest Dominique Strauss-Kahn, who is currently out on $1 million bail.

Emperor Norton on June 18, 2011 at 10:57 AM

The man who runs the world’s largest mutual funds told CNBC today that the US is in worse financial shape than Greece, which is really saying something, considering that S&P just made them the lowest-rated country in the world for bond security, below even Pakistan.

This is why it’s critical to elect a true conservative, and a senate majority – unless deep and drastic cuts in entitlements and anti-business regulations and taxes are made – we’re boned. Romney and the other RINOs don’t have the stones to do what is necessary to save the republic, the democrats are actively seeking bankruptcy.

Rebar on June 18, 2011 at 11:09 AM

Stop secret negotiations.

Put them in front of cameras.

artist on June 18, 2011 at 11:13 AM

the Republican house has failed to do so either since they regained the majority.

Plenty of blame to go around.

turfmann on June 18, 2011 at 10:35 AM

Pretty sure the House passed the Ryan Budget earlier this year and the Senate, including five RINOs, defeated it.

BKeyser on June 18, 2011 at 11:16 AM

The global lender forecast that U.S. gross domestic product would grow an anemic 2.5 percent this year and 2.7 percent in 2012.

Overly optimistic.

iurockhead on June 18, 2011 at 11:17 AM

The global lender forecast that U.S. gross domestic product would grow an anemic 2.5 percent this year and 2.7 percent in 2012.

With inflation running at 3.5%, real GDP growth will be negative. Democrats are lying when they say the economy is growing. In real terms it’s contracting and I’m wondering when the GOP is going to figure it out and call them on it.

RadClown on June 18, 2011 at 11:20 AM

Tina, even though it has been 779 days since the Democrats have passed a budget, the Republican house has failed to do so either since they regained the majority.

Plenty of blame to go around.

turfmann on June 18, 2011 at 10:35 AM

uh –

House Passes Paul Ryan Budget Proposal in Partisan Vote

Aardvark on June 18, 2011 at 11:23 AM

All according to plans, my friends, all according to plans.

iurockhead on June 18, 2011 at 11:23 AM

In Greece global Marxists see victory within their grasp.

Lenin is sitting up in his grave, Stalin’s eyes have popped open.

American liberals think more socialism will make it all OK.

Speakup on June 18, 2011 at 11:29 AM

Interesting look back at one of the first victims of the financial collapse: Iceland: What We Should Have Done

“Iceland didn’t rescue its banks. It couldn’t afford to do it. So, they went bust. Iceland looked like it was going down a path of permanent financial armageddon. However, Iceland is in better financial shape than the rest of Europe today.”

slickwillie2001 on June 18, 2011 at 11:38 AM

Democrats, leading from behind.

jnelchef on June 18, 2011 at 11:50 AM

Interesting look back at one of the first victims of the financial collapse: Iceland: What We Should Have Done

“Iceland didn’t rescue its banks. It couldn’t afford to do it. So, they went bust. Iceland looked like it was going down a path of permanent financial armageddon. However, Iceland is in better financial shape than the rest of Europe today.”

slickwillie2001 on June 18, 2011 at 11:38 AM

There was a ReasonTV video about 1 week ago where basically it was pointed out that European countries that had embraced market solutions and austerity programs had initially more falls in the market but are ALREADY recovering. In other words, some pain in the beginning but quicker, healthier recoveries.

MeatHeadinCA on June 18, 2011 at 11:50 AM

Maybe the auto pen can write up a budget for us. Then we can have TOTUS explain it to us. Human leaders are so 2010. I, for one, welcome our new mechanical over lords.

bitsy on June 18, 2011 at 11:50 AM

CCB: the new watch word…

Khun Joe on June 18, 2011 at 12:07 PM

well there you have it! we pretty much HAVE to ‘invest’ in trains now then! CHOOO CHOOOOOOO! /biden

p00pies on June 18, 2011 at 12:24 PM

It has now been 779 days since Democrats have passed a budget — even though the law requires them to do just that.

Isn’t this the most salient point? Laws are for little people. The aristocrats can do whatever they damn well please and idiot Americans will just go on watching American Idol with nary a care.

You don’t have to be politically involved 24/7/365, but if you’re simply going to let these coked-up power whores do as they please then I don’t want to hear a goddamned thing when the bullpies hit the fan.

Aquateen Hungerforce on June 18, 2011 at 12:33 PM

At some point Democrat cannot ignore Standard and Poors, Moodys, and the IMF. We have a debt crisis, the stimulus hasn’t worked, so it is time to cut, cap, and balance.

Fight tooth and nail and Republicans win independents (my view is that spending cuts, not raising taxes, is preferred by both independents and the tea party).

Cut, cap, and balance is brilliant politics and pretty good policy, too.

Angry Dumbo on June 18, 2011 at 1:24 PM

No budget passed in over 2 years, unsustainable and out of control entitlement spending, deficits over a trillion dollars…. just one thing to do. Make another ad of Representative Paul Ryan throwing granny over a cliff to scare people to vote for the same corrupt bastards who keep making this disaster bigger with each passing day.

Yakko77 on June 18, 2011 at 1:33 PM

This is why just any person with an R is not an acceptable replacement for Obama. The only acceptable choice is a person who can change the direction of the nation, not just simply slow down the decline.

Vote constitutional conservative, cause if they are not on the ballot in 2012, I vote for the full course progressive meal.

astonerii on June 18, 2011 at 2:10 PM

At some point Democrat cannot ignore Standard and Poors, Moodys, and the IMF.
Angry Dumbo on June 18, 2011 at 1:24 PM

You totally underestimate the power the government wields over the credit agencies. They recently stated that they might be forced to lower the credit rating of the United States of America, and low and behold, they are currently under investigation for how they came up with ratings for mortgaged backed securities. The government has ways of making Standards and Poors as well as Moodys say what they want. Both are government sponsored entities more or less, locked into place by government fiat, they are effectively monopolies. As far as the IMF, we are the primary funder of it, it would not take much more than a short period of no funding to get them back in line.

astonerii on June 18, 2011 at 2:16 PM

astonerii on June 18, 2011 at 2:16 PM

S & P and Moody’s must serve a global market. If they become unreliable, others will take their place.

Caststeel on June 18, 2011 at 4:27 PM

Folks. Even despots know failure has a price.

StubbleSpark on June 18, 2011 at 5:08 PM

Caststeel on June 18, 2011 at 4:27 PM

They have been unreliable for a very long time. Who do you think wrote off all the sub prime mortgages as AAA rated? They have no real competition, as they are protected from other American companies taking their place, so long as the government stands it ground. Thus, it does not matter what the rest of the world does, we got what we got, and there will be no replacement for Americans, it is illegal for any other company to join the market.

astonerii on June 18, 2011 at 8:57 PM