Pacific Views

Those alarmists at the International Monetary Fund.

They're giving Dubya's economic and fiscal policies a bad review. Earlier today, the IMF released a report warning that the skyrocketing US budget deficit and unfavorable balance of trade is creating a debt so huge it may threaten the stability of the world economy.

In nearly 60 pages of carefully worded analysis, the report sounded a loud alarm about the shaky fiscal foundation of the United States, questioning the wisdom of the Bush administration's tax cuts and warning that large budget deficits posed "significant risks" not just for the United States but for the rest of the world.

The report warned that the net financial obligations of the United States to the rest of the world could equal 40 percent of its total economy within a few years — "an unprecedented level of external debt for a large industrial country" that it said could play havoc with the value of the dollar and international exchange rates.

The dangers, according to the report, are that the United States' voracious appetite for borrowing could push up global interest rates and thus slow down global investment and economic growth.

Washington says that Dubya's plans to cut the budget deficit in half in the next five years mean that the IMF's conclusions are rubbish. Of course, the administration is ignoring the fact that few observers believe Dubya can follow through on this promise.

You can find a transcript of the IMF press conference about the report here.

Via NY Times.