The International Monetary Fund warned the world’s wealthiest nations Sunday to watch their surging levels of government debt, saying it could drag down the growth needed to ensure continued economic recovery.
The economic crisis is leaving “deep scars in fiscal balances, particularly in the advanced economies,” John Lipsky, the IMF’s No 2. official, told the China Development Forum in Beijing. He said that countries that have been going into debt to stimulate their economies should now prepare for belt-tightening steps next year.
“Policymakers should be making it clear to their citizens why a return to prudent policies is a necessary condition for sustained economic health,” said Lipsky, who is the fund’s deputy managing director, according to remarks prepared for the conference.
The text of Lipsky’s speech, “Fiscal Policy Challenges in the Post-Crisis World,” is available here.
Columnist Mark Steyn, who has chronicled the decline of Europe’s economy and identity, observes that government debt for entitlements like health care has broader implications for other government activities and national stature. From National Review, The Corner:
[One] of the first things that middle-rank powers abandon once they go down this road is a global military capability. If you take the view that the U.S. is an imperialist aggressor, congratulations: You can cease worrying. But, if you think that America has been the ultimate guarantor of the post-war global order, it’s less cheery. Five years from now, just as in Canada and Europe two generations ago, we’ll be getting used to announcements of defense cuts to prop up the unsustainable costs of big government at home. And, as the superpower retrenches, America’s enemies will be quick to scent opportunity.
Longer wait times, fewer doctors, more bureaucracy, massive IRS expansion, explosive debt, the end of the Pax Americana, and global Armageddon. Must try to look on the bright side . . .
How about infrastructure? If new entitlements and demographic trends make defense spending difficult, imagine how hard it will be to raise the money for roads, waterways, harbors, rails and airport facilities.
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