Workers using a metal saw in Tacoma, Washington, United States: policies need to be realigned to raise productivity (photo: Jetta Productions Blend Images/Newscom)
Ten Ways to Expand U.S. Growth
July 27, 2017
IMF NEWS
Workers using a metal saw in Tacoma, Washington, United States: policies need to be realigned to raise productivity (photo: Jetta Productions Blend Images/Newscom)
July 27, 2017
With the economy at full employment, the United States will need to gradually remove both fiscal and monetary support, while intensifying efforts to address multiple constraints on its medium-term growth prospects, the IMF says in its latest economic report.
These constraints include weak productivity growth, an aging population, falling labor force participation, an increasingly polarized income distribution, and high levels of poverty. These growing headwinds are made worse by a share of income paid to workers that is nearly 4 percentage points lower than that in the early 2000s, a middle class that has shrunk to its smallest size over the past 30 years, and a potential growth rate that is virtually the lowest since the 1940s.
What can be done? The IMF report offers some solutions:
Fiscal policy should aim for a gradual and sustained reduction in the general government deficit—brought about by both higher revenues and lower spending—to put public debt on a downward path.
On the monetary front, the Fed should continue to gradually raise interest rates in light of incoming data, while reducing its holdings of securities in a predictable and well-communicated manner to avoid undue market volatility.
