The IMF Should Shut Its Yapper

The IMF has weighed in on the silly sequestration process that our dysfunctional government implemented, saying the budget cuts in the United States were “excessively rapid and ill-designed.”

I agree with the “ill-designed” comment — no rational person could think that the sequestration process was “well-designed” — but the IMF really doesn’t seem to be troubled about the process, so much as the fact that the cuts were made at all.  The IMF report suggests that government spending cuts inevitably hurt economic growth, both in the short term and the long term.  The report states, for example, that “indiscriminate” reductions in education, science and infrastructure spending could reduce potential economic growth.

Here’s the money quote:  the IMF report concludes that the sequestration cuts “should be replaced with a back-loaded mix of entitlement savings (related to healthcare and pensions) and new revenues, along the lines of the administration’s budget proposal.”  Let’s deconstruct that conclusion.  “Back-loaded” means not right now.  “Entitlement savings” means don’t cut government payrolls or government contracts.  “New revenues” means raise taxes.

In view of the recent experience in Europe and the U.S., it’s hard to believe that reputable entities would continue to insist that government spending creates economic growth, but it’s not surprising that the career bureaucrats at the IMF and its perma-tanned leader, Christine Lagarde, reached such conclusions.  The IMF is one of those curious, quasi-governmental entities in the modern world that is supported by government money and interacts with government employees who spend tax dollars.  In view of that fact, of course the IMF is going to object to government spending cuts and contend that increased taxes are the only answer.

The IMF has zero credibility on what produces true economic growth.  It should just shut up about how the United States conducts its economic affairs and be grateful for our substantial contribution.