In the same week that the International Monetary Fund (IMF) delivered a sharp critique of the U.S. economy and concluded that its largest shareholder lacked a “credible strategy” to stabilize its public debt, the finance ministers of the largest economies gave their tacit blessing to President Obama’s plan to deal with the deficit.
This confidence in the Obama plan of deficit reduction was expressed late yesterday at a news conference at the IMF/World Bank meeting following a summit of the finance ministers of the G-20 nations—the largest economies in the world, representing 19 countries and the European Union.
Speaking for the G-20 group was Christine Lagarde, finance minister of France. Referring to the IMF report that was critical of public debt in the U.S. and warning that it could lead to a future international financial crisis, HUMAN EVENTS asked LaGarde whether “with a vote coming up soon [in Congress] on whether or not to raise the debt ceiling in this country, as well as always the possibilities of government shutdowns when Congress decides on the funding for the government, is there considerable concern among the ministers about what would happen if there was a government shutdown in the United States or a failure to raise the debt ceiling?”
“You asked us about the debt and the latest development as far as budget discussions were concerned, and the long‑term plan [that] was being considered as a result of President Obama’s intervention,” said Lagarde, who has been mentioned as a center-right candidate for president of France if Nicolas Sarkozy does not run again in 2012. “We clearly did not discuss that particular matter, but we were reassured by the proposed decisions certainly in view of the recommendations made by the IMF which concern, in particular, the large deficit of the United States and the debt trend that is a result of such [a] situation.”
As carefully worded as Lagarde’s answer to HUMAN EVENTS was, the “proposed decisions” she referred to are clearly Obama’s proposals most recently voiced in his address at The George Washington University last week. The President’s call for raising taxes on the highest wage earners in the U.S. appear to be in line with the IMF’s suggestions for higher taxes. In its recent Fiscal Monitor warning that continued U.S. debt would have dangerous consequences for the world economy, the IMF concluded that the U.S. had so far spelled out less than half the tax increases and spending cuts necessary to bring down the public debt.
“More sizeable reductions in medium-term deficits are needed and will require broader reforms, including to social security and taxation,” the IMF concluded.
Photo: Political Editor John Gizzi with French Finance Minister Christine LaGarde at IMF/World Bank Mtg; In center is LaGarde spokeswoman Martine Montin.