IMF Warns US on National Debt

The IMF has come out with a rather blunt diplomatic warning to the US to get a handle on its national debt. This is yet another sign of impending problems coming sooner rather than later.

The International Monetary Fund is an agency that usually appears in the news when it is trying to help some wayward company in Africa get through a financial situation The IMF is considered very controversial in its economic views, but there is no doubt that it appears on the world wide stage when a country is facing dire economic situations.

The United States now falls into this category. The IMF projects that the deficit will stand at 64 percent of gross domestic product this year, rising to just over 96 percent by 2020. The magic number with financial failure when it comes to percentage of GDP is 100 percent according to most economists. A four point difference in year 2020 is hardly a buffer we can sleep comfortably with.

So, let’s boil it down to the nub of the problem. We have basically 9½ years to get our act together. That seems like plenty of time, but is it really? President Obama has promised to halve the annual deficit in the next three years. Really? Does anyone think that will happen? Even if it does, it just gives us perhaps another 10 years before the debt hits 100 percent of GDP.

The problem is systemic. We have politicians that are elected to pursue whatever their pet topic is of the day. Nobody is elected to unwind the legislation that has been passed previously. More importantly, nobody does it! The future is going to be a tough one for Americans. Sooner, rather than later, we will be looking at significantly increased tax rates and slashed benefits. The national debt numbers just do not lie.

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