If you are a casual follower of all that has been going on in Washington over the past few weeks then you probably find it difficult to discern fact from fiction. Are we going through a government “shutdown” or a government “slowdown”? Would failing to raise the debt ceiling bring be an “economic disaster” or is the whole thing much a due about nothing?
So when we heard that “Meet the Press” was airing in interview with IMF Managing Director Christine Lagarde we thought we’d tune in and see if she could bring any clarity to the situation.
The International Monetary Fund (IMF) describes itself as: “an organization of 188 countries, working to foster global monetary co-operation, secure financial stability, facilitate international trade, promote high unemployment and sustainable economic growth, and reduce poverty around the world”. Ms. Lagarde has served as Managing Director since July of 2011.
Ms. Lagarde said that the IMF views the world’s largest economy as exhibiting slow but steady growth. But there is real concern at the IMF that this latest round of political infighting in Washington could very easily take the US economy into another recession. If that happens, the international economic community will fall into recession as well. According to Lagarde, Washington’s failure to reach a deal on the shutdown and debt limit “would bring a massive disruption the world over”.
Host David Gregory asked Lagarde what she would say to those like Senator Rand Paul who assert that the whole debt ceiling hubbub is a “manufactured crisis”…who say the country will never default because “it will meet its obligations by paying the interest on the debt and deferring other payments to later dates”. Lagarde: “when you are the largest economy in the world, when you are the safe haven in all circumstances, as has been the case, you can’t go into that creative accounting business.”
Lagarde was asked what advice she would give US lawmakers in dealing with the country’s economic issues. “Move quickly but slowly” she said. Move quickly (paraphrasing) to come to a long term solution to the solvency of Medicare, Medicaid and Social Security. Reign in spending, but do it slowly over time; being careful not to gut spending in such a way that it harms the recovery.
Christine Lagarde and the members of the IMF are smart people who know a bit about economics and monetary policy. They are unencumbered by partisan ideology.
We might want to listen to what they have to say.