Good news: IMF lowering expectations for global economic growth

posted at 2:41 pm on October 9, 2012 by Erika Johnsen

The International Monetary Fund is yet again lowering everybody’s already-lowered expectations for global economic growth. But, pourquoi?, you may very well ask. That would be because nobody in the developed world at this moment seems fully capable of getting their fiscal act together.

Shockingly, multiple European governments are still failing to meet the deficit-reduction targets they’re required to hit as part of their various agreements with the IMF and other bodies, reports the WSJ. Whoever could’ve seen this coming?

France, Spain and several other euro-zone governments won’t hit budget deficit targets agreed to with European authorities, the International Monetary Fund said Tuesday, setting the stage for a contentious debate over whether the governments should pursue more cuts or allow the targets to slip.

Governments across the European Union have been slashing spending and raising taxes to bring their deficits back in line with the bloc’s budget rules, which call for deficits to remain under 3% of gross domestic product. But anemic growth and recession, partly because of previous rounds of austerity, have made the deficit targets difficult to hit and sparked growing political discontent in many of the EU’s 27 member states.

France, Spain, and Italy are now all set to miss their target deficits in the next couple of years, and the IMF has upwardly revised their springtime projection for Greece’s total debt for this year from 153 percent of GDP to 171 percent. All of this is supposed to beg the question — should the euro-countries be required to stick to their still-not-even-a-real-solution targets, or should everybody just relax the rules and keep merrily skipping down the path of fiscal insolvency?

The world’s largest national economy and its current uncertainty-inducing administration, of course, is also a major offender, via The Hill:

The IMF now anticipates the global economy will grow 3.6 percent in 2013, down 0.3 percent from its July prediction, which was itself a downgrade from the April outlook. It anticipates the U.S. economy will grow 2.1 percent in 2013, a drop of 0.1 percent from July.

However, if Congress fails to avert the fiscal cliff, the tightening that would come from the automatic spending cuts and expiring tax cuts could throw the U.S. into a “full-fledged recession,” the IMF warned. And if that weren’t enough, that downturn would spill over into the global economy, as the blow to confidence would sink stock prices. Financial markets could also take another blow if Congress again pushes up against the brink on raising the debt ceiling, which is expected to be required early in 2013.

The uncertainty of the fiscal cliff’s fate is going to have a huge impact on markets in the near future here, but my real question is this: How is our election still looking so close when Europe’s proffered example — one of the unemployment, stagnation, shrinking incomes, and misery that ensues from huge governments spending too much money on entitlement and social programs — is smacking the rest of the world in the face?

The Office of Management and Budget recently predicted that, due to President Obama’s profligate spending habits, our national debt is projected to reach over 25 trillion dollars by 2022. The trend of our debt growing rapidly while our economic growth piddles along has got to end — we’ve only lasted this long because of the relative strength and hugeness of our economy, but with another four years of President Obama at the helm, we’re pretty much guaranteed to continue drifting through the economic doldrums. The power of Romney’s pro-growth message is practically laughable next to President Obama’s pro-fairness message — leastaways, it would be laughable, if we were making a strong stand against following Europe’s example instead of dithering with more of the same policies.


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German hegemony FTW?

Red Cloud on October 9, 2012 at 2:48 PM

“beg the question” – Erika, this isn’t the correct use of the phrase. I think you mean “raise the question.” The phrase “Begging the question” means “using circular reasoning.”

Mohonri on October 9, 2012 at 2:49 PM

Obama: Yeah, but 7.8%! You guys lie! You change your positions! Look Bishop.

Oil Can on October 9, 2012 at 2:50 PM

The public schoolbooks will soon read that the destruction of western economies, and their rebirth as Socialist ones, was only the beginning stage of the new dawn – Communism – Utopia.

Marx and Engels will soon become the saviours of America and the world.

If only they had listened, sooner.

- The Commie

OhEssYouCowboys on October 9, 2012 at 2:51 PM

Yes, but what about Big Bird?

lorien1973 on October 9, 2012 at 3:04 PM

And if that weren’t enough, that downturn would spill over into the global economy, as the blow to confidence would sink stock prices.

Since everyone can’t win, nobody can win.

Sounds fair.

Lily on October 9, 2012 at 3:04 PM

Blame Obama.

faraway on October 9, 2012 at 3:12 PM

…we want to grow up and be like Europe!

KOOLAID2 on October 9, 2012 at 3:16 PM

OT:

what Romney has never said on the campaign stump until today is that he had previously met one of the victims: Glen Doherty, a former Navy SEAL who was working as a State Department contractor in Libya.

faraway on October 9, 2012 at 3:17 PM

The power of Romney’s pro-growth message is practically laughable next to President Obama’s pro-fairness message — leastaways, it would be laughable, if we were making a strong stand against following Europe’s example instead of dithering with more of the same policies.

Romney’s message is laughable? I don’t fully agree but I’m concerned that across the board tax cuts will fail to generate real growth and instead bring about more of the economic gimmickry that failed under Bush- with very disturbing consequences for the federal deficit.

It’s really not that much unlike a Keynsian policy of increased spending to boost the economy (Romney would prefer to let individuals, instead of the government, charge up the deficit credit card).

bayam on October 9, 2012 at 3:20 PM

Forward

Philly on October 9, 2012 at 3:24 PM

And in related news Birthrates in the US are now below replacement 2.2 for 3 years running. I guess western civ. should bail itself out by raising taxes more.

Who could have seen this coming, (what with that huge experiment in socialism going on in Europe)?

Obama for one.

WryTrvllr on October 9, 2012 at 3:31 PM

bayam on October 9, 2012 at 3:20 PM

Man, that $170 billion deficit under Bush was just awful. :( 4.7% unemployment. Miserable.

Though, I’m glad you are reaching the acceptance phase of Obama’s defeat.

lorien1973 on October 9, 2012 at 3:31 PM

How is our election still looking so close when Europe’s proffered example — one of the unemployment, stagnation, shrinking incomes, and misery that ensues from huge governments spending too much money on entitlement and social programs — is smacking the rest of the world in the face?

I’ve tried and tried to find a reasonable answer to this question but the ugly truth is that half of the american population is just plain stupid.

There’s no sugar coating it anymore, half of our population is just not that bright. They are disengaged from any personal responsibility and their attention span is laughably short when it comes to anything of real substance. Public schools are graduating students without any writing, reading and comprehension skills (although jacked up on an unhealthy dose of self admiring self esteem) and countries with a fraction of our school budgets manage to produce students who, in 4th grade, run circles around our high school seniors when it comes to subjects like math, science, chemistry and history.

We can ask ourselves forever why our elections are this close when the status of practically the whole world acts as proof that we’re shooting ourselves in the foot with a cannon if we continue down this road, but the answer is quite simple and rather embarrassing – a huge percentage of our fellow americans are too dumb to see what’s happening.

We need to turn our children and our country around in the next generation or we’ll sink into a third world country status.

NapaConservative on October 9, 2012 at 3:55 PM

It’s really not that much unlike a Keynsian policy of increased spending to boost the economy (Romney would prefer to let individuals, instead of the government, charge up the deficit credit card).

bayam on October 9, 2012 at 3:20 PM

Unfortunately this part at least is very true. If gov’t racks up the debt we go bankrupt nationally. If individuals keep going we’ll have a 1930′s repeat.

I hope whatever survives the USA’s collapse takes what happens to us as a warning to make personal debt illegal beyond small amounts, and government debt illegal except in times of full-scale war. Frankly we should’ve thought about the first long ago!

MelonCollie on October 9, 2012 at 8:48 PM