With the debt ceiling debate in the news, it’s a good time to ask what the global institutions charged with regulating the international economy have to say about U.S. fiscal policy. When countries borrow money from the International Monetary Fund, what the IMF says can affect markets and policies of those governments. But the U.S. receives only advice and no funds so how much leverage can the IMF have with its largest shareholder?
The goal of the IMF is to make sure that nations are adopting policies that prompt a stable currency and produce economic growth. Starting in 1999 the IMF began publicizing report cards on countries in order to engage their politicians in a policy minded debate. The IMF review and its impact was seen when the review was published in July of 2011 and then the debate between Congress and the White House was settled in April of the same year.
Much like criticizing your boss, when the IMF talks about the policies in the U.S. there is a tendency to stress the positive. Lately however this has not been the case. The 2011 IMF report called the U.S. model “unsustainable” and recommended an array of changes including raising the retirement age, cutting Social Security and nationalizing the sales tax. With changes to the social safety net and increasing protections for labor, the recommendation had something for everyone. Despite this, there were few in Congress that took to the report and no mention of it by the White House.
Just because information is available doesn’t mean it will find its way into the hands of policy makers. Just as the IMF wishes the U.S. would learn from the debt ceiling debate in 2011, it needs to adapt how its message gets out there.