The International Monetary Fund warned the United States that government spending and increasing national debt are not sustainable and could hurt the global economy.
The Washington, D.C.-based group that represents 190 member countries also called the U.S. economy “overheated.” The debt warning follows several other high-profile calls to address growing U.S. debt.
“Amid mounting debt, now is the time to bring back sustainable public finances,” according to the latest IMF Fiscal Monitor report.
In its latest World Economic Outlook, the IMF warned that the U.S. national debt and deficit could push inflation levels higher.
“The exceptional recent performance of the United States is certainly impressive and a major driver of global growth, but it reflects strong demand factors as well, including a fiscal stance that is out of line with long-term fiscal sustainability,” according to the report. “This raises short-term risks to the disinflation process, as well as longer-term fiscal and financial stability risks for the global economy since it risks pushing up global funding costs. Something will have to give.”
In a blog post, IMF Chief Economist Pierre-Olivier Gourinchas said the U.S. must take a gradual approach.
“The strong recent performance of the United States reflects robust productivity and employment growth, but also strong demand in an economy that remains overheated,” he wrote. “This calls for a cautious and gradual approach to easing by the Federal Reserve.”
David Walker, former Comptroller General of the United States and a member of the Main Street Economics Advisory Board, said Congress must take action.
“The International Monetary Fund is the latest independent entity to voice concern regarding the U.S. federal government’s overspending practices and failure to take steps to restore long-term financial stability,” he said. “Despite that fact, our federal elected representatives continue to turn a blind eye to the soaring national debt and federal financial mismanagement. As Americans, We the People must engage with our Congressional representatives and demand that they take steps to restore federal fiscal sanity and sustainability.”
Similar warnings about U.S. debt have been coming from both inside and outside the government.
In November 2023, Moody’s Investors Service gave the federal government a negative credit outlook citing large deficits, high interest rates and waning political interest in addressing the nation’s deficit. The other two credit-rating agencies, S&P Global and Fitch, grade U.S. credit at AA+. In August 2023, Fitch Ratings decided to downgrade the government’s credit rating from the highest level of AAA down one tier to AA+. Fitch pointed to the U.S. government’s high national debt and deficits and an “erosion of governance.”
In February, a Congressional watchdog told President Joe Biden and Congress that the federal government is on an “unsustainable long-term fiscal path.”
The report from the U.S Government Accountability Office highlighted the challenges. And a Congressional Budget Office report from February found federal spending is projected to remain unsustainable in the decades to come.
“The federal government faces an unsustainable long-term fiscal path,” according to the U.S Government Accountability Office report. “We project that debt held by the public as a share of the economy will more than double over the next 30 years and will grow faster than the economy over the long term if current revenue and spending policies are not changed.”
