{
  "title": "Between a Rock and a Hard Place: U.S. Fiscal Policy",
  "publication": "IMF Blog, July 25, 2011",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2011/07/25/between-a-rock-and-a-hard-place-u-s-fiscal-policy",
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  "summary": "The United States faces two pressing fiscal challenges: raise the debt ceiling, and begin reducing deficits and debt.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- The United States faces two pressing fiscal challenges: raise the debt ceiling, and begin reducing deficits and debt.\n- The situation is characterized as “between a rock and a hard place,” with crucial questions on how much savings to find, in what form, and when to implement them.\n- The fiscal problem was center stage in the IMF’s 2011 annual assessment—or Article IV consultation—of the United States’ economy."
    },
    {
      "heading": "Fiscal position and unsustainability",
      "content": "- By the end of this year, federal debt held by the public will represent 70 percent of the U.S. economy, almost double the 36 percent it was in 2007.\n- The federal fiscal deficit will be 9.3 percent of GDP this year.\n- If left on automatic pilot, debt would continue to increase faster than the economy until financial markets react; credit rating agencies have issued warnings.\n- Active policies to lower the fiscal deficit of the order of 5 percent of GDP in the next several years would put debt on a sustainable path based on official U.S. projections.\n- Under more conservative IMF projections, the United States needs to find savings of approximately $6 trillion.\n- A $4 trillion savings over 10 years, as publicly discussed by policymakers during debt ceiling negotiations, is described as a very good first step."
    },
    {
      "heading": "Unemployment and short-term risks",
      "content": "- Too much fiscal retrenchment in the short run could unduly weaken an economy recovering very gradually and lately losing momentum.\n- In the first half of 2011, output appears to have grown at an average annual rate of less than 2 percent.\n- That pace is insufficient to significantly reduce very high unemployment.\n- Persistently weak labor market conditions can damage long-run prospects by causing long-term unemployed workers to lose skills and find it increasingly difficult to find jobs."
    },
    {
      "heading": "Policy recommendations and sequencing",
      "content": "- Top priority: reach political agreement on a comprehensive adjustment plan that begins the consolidation process in FY 2012.\n- The plan should be:\n  - Appropriate in size and spread over several years to avoid overly tight policies in 2012-13.\n  - Balanced to include cuts in discretionary spending, higher revenues (for example by closing tax loopholes), and entitlement reforms.\n  - Entitlement reforms should focus on containing the rate of growth of entitlements—namely, social security and health care—and can kick in later, but must be agreed and legislated now.\n- Curbing non-defense discretionary spending alone is not sufficient because this type of spending is not large enough to achieve the required deficit reduction.\n- Analogy: start now but avoid “crash dieting” — gradual and enduring adjustment is preferable, and the strategy should rely on more than one lever."
    },
    {
      "heading": "Mechanics and risks affecting required adjustment",
      "content": "- Putting public debt on a sustainable path—stabilizing its ratio to GDP by mid-decade and then lowering it gradually—depends on:\n  - The pace at which the economy grows: stronger growth increases revenues and reduces the debt-to-GDP ratio.\n  - Interest rates in the next several years: higher interest rates increase the adjustment required because the interest bill consumes more revenue.\n- Higher debt tends to lift interest rates, which raises the interest bill and complicates consolidation efforts.\n\nSource: Between a Rock and a Hard Place: U.S. Fiscal Policy (IMF blog, July 25, 2011).\n\n---\n\n Content in this bundle\n\n- 072511a\n  - 072511a (PDF){rel=\"external\" type=\"text/html; charset=utf-8\"}\n- iMFdirect 博客: 左右为难 - 美国财政政策, 2011 年 7 月 25 日\n  - iMFdirect 博客: 左右为难 - 美国财政政策, 2011 年 7 月 25 日 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - iMFdirect 博客: 左右为难 - 美国财政政策, 2011 年 7 月 25 日 (PDF){rel=\"external\" type=\"application/pdf\"}\n- 財政政策を巡り苦境に立つ米国\n  - 財政政策を巡り苦境に立つ米国 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 財政政策を巡り苦境に立つ米国 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Country Report\n  - Country Report (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Country Report (PDF){rel=\"external\" type=\"application/pdf\"}\n- Между двух огней: налогово-бюджетная политика США\n  - Между двух огней: налогово-бюджетная политика США (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Между двух огней: налогово-бюджетная политика США (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- https://www.imf.org/wp-content/uploads/2011/07/rodrigo-valdes.jpg\n- IMF’s 2011 annual assessment\n\nSource: https://www.imf.org/en/blogs/articles/2011/07/25/between-a-rock-and-a-hard-place-u-s-fiscal-policy"
    }
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    "Published: July 25, 2011",
    "The United States faces two pressing fiscal challenges: raise the debt ceiling, and begin reducing deficits and debt.",
    "The situation is characterized as “between a rock and a hard place,” with crucial questions on how much savings to find, in what form, and when to implement them.",
    "The fiscal problem was center stage in the IMF’s 2011 annual assessment—or Article IV consultation—of the United States’ economy.",
    "By the end of this year, federal debt held by the public will represent 70 percent of the U.S. economy, almost double the 36 percent it was in 2007.",
    "The federal fiscal deficit will be 9.3 percent of GDP this year.",
    "If left on automatic pilot, debt would continue to increase faster than the economy until financial markets react; credit rating agencies have issued warnings.",
    "Active policies to lower the fiscal deficit of the order of 5 percent of GDP in the next several years would put debt on a sustainable path based on official U.S. projections.",
    "Under more conservative IMF projections, the United States needs to find savings of approximately $6 trillion.",
    "A $4 trillion savings over 10 years, as publicly discussed by policymakers during debt ceiling negotiations, is described as a very good first step.",
    "Too much fiscal retrenchment in the short run could unduly weaken an economy recovering very gradually and lately losing momentum.",
    "In the first half of 2011, output appears to have grown at an average annual rate of less than 2 percent.",
    "That pace is insufficient to significantly reduce very high unemployment.",
    "Persistently weak labor market conditions can damage long-run prospects by causing long-term unemployed workers to lose skills and find it increasingly difficult to find jobs.",
    "Top priority: reach political agreement on a comprehensive adjustment plan that begins the consolidation process in FY 2012.",
    "The plan should be:",
    "Curbing non-defense discretionary spending alone is not sufficient because this type of spending is not large enough to achieve the required deficit reduction.",
    "Analogy: start now but avoid “crash dieting” — gradual and enduring adjustment is preferable, and the strategy should rely on more than one lever.",
    "Putting public debt on a sustainable path—stabilizing its ratio to GDP by mid-decade and then lowering it gradually—depends on:",
    "Higher debt tends to lift interest rates, which raises the interest bill and complicates consolidation efforts.",
    "**072511a**",
    "**iMFdirect 博客: 左右为难 - 美国财政政策, 2011 年 7 月 25 日**",
    "**財政政策を巡り苦境に立つ米国**",
    "**Country Report**",
    "**Между двух огней: налогово-бюджетная политика США**",
    "[https://www.imf.org/wp-content/uploads/2011/07/rodrigo-valdes.jpg](https://www.imf.org/wp-content/uploads/2011/07/rodrigo-valdes.jpg)",
    "[IMF’s 2011 annual assessment](http://www.imf.org/external/np/sec/pn/2011/pn1197.htm)"
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