Good news: IMF lowering expectations for global economic growth

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.

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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?

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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?

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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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Ed Morrissey 12:40 PM | December 16, 2024
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