WASHINGTON May 20 The International Monetary
Fund on Monday said the United States was getting carried away
with a government austerity drive, offering some of the
institution's bluntest criticism yet of Washington's rush to cut
its budget deficit.
Despite high unemployment, Washington is on track to slash
its budget shortfall this year by the most in nearly a half
"We think this is too much," Carlo Cottarelli, head of the
IMF's fiscal affairs division, told a conference.
The IMF has advised European governments embroiled in a debt
crisis to shrink their deficits aggressively to win back the
confidence of lenders who doubt their ability to pay back loans.
But there is very little risk of similar turmoil will
ensnare the United States anytime soon, Cottarelli said.
Interest rates remain low in the United States, even when
factoring in inflation, a sign that lenders still trust the U.S.
government to make good on its debts.
"There is no need for the U.S. to move so quickly," he said.
Cottarelli said a slower pace of fiscal consolidation should
be accompanied by a long-term plan to keep the budget
sustainable as America's population ages and demands more
government services like health care and pensions.
Most economists think the U.S. economy would be growing much
more quickly were it not for efforts to shrink the deficit. The
U.S. public sector began to tighten its belt in 2011. This year,
Washington stepped up its austerity drive, raising taxes in
January and enacting sweeping budget cuts in March.
The nonpartisan Congressional Budget Office estimated last
week that the deficit was on track to shrink this year to the
equivalent of 4 percent of national economic output, down from 7
percent last year. That would be the sharpest contraction in the
deficit since 1969.
The fiscal consolidation is putting further drag on an
economy already held back by the weak household finances, which
were battered by the 2007-09 recession.
A drop in federal spending led the economy to barely expand
in the fourth quarter of 2012. The economy picked up in the
first three months of this year, although it remained subdued
and most economists expect the austerity will slow growth again
in the April-June period.
"It's affecting growth unnecessarily," said Cottarelli.