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IMF: Deficits Bad

Posted By Barry Ritholtz On April 14, 2004 @ 5:32 pm In Finance | Comments Disabled

File this one under “No $%^& Sherlock:” U.S. budget deficits are not good:

Two international economic watchdogs warned that President Bush’s deficit plans will make the U.S. and other countries poorer in the long run, and one of them suggested higher taxes to balance the U.S. budget.

The International Monetary Fund estimated that even if the U.S. budget deficit is cut in half in five years, as the Bush administration projects, U.S. gross domestic product would be 1.4% lower by 2020 than under normal economic scenarios. For the world, GDP would be as much as 2% lower. The estimates were included in portions of the IMF’s semiannual World Economic Outlook, released Wednesday.

Despite some of the political noise — on both sides of the aisle — deficits are actually good during recessions; It’s in the aftermath of the recovery that deficits have negative consequences.

Like so much else in life, timing is everything.

Watchdogs Sound Alarm On Bush’s Deficit Policies [1]
Greg Ip
Wall Street Journal, April 14, 2004 3:08 p.m.


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[1] Watchdogs Sound Alarm On Bush’s Deficit Policies: http://online.wsj.com/article/0,,SB108196845862582682,00.html

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