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| IMF issues downbeat US economic forecast - US politics live | |
| (40 minutes later) | |
| 11.34am: The IMF also had what might be perceived as a slight dig at the Romney campaign's overheated rhetoric regarding China and Mitt Romney's windbaggery threatening of a trade war: | |
| Staff welcomes the authorities' continued commitment to trade liberalization and market access, in support of growth and expanded job opportunities.... Staff commends the authorities' efforts to resist protectionist pressures in a challenging global environment, and to ensure continued consistency of domestic legislation and practices with WTO principles and international obligations. | |
| It's a coincidence, of course. | |
| Actually, apart from the grim economic forecasts, there's little for the GOP to cheer, certainly policy-wise. And this is coming from the IMF remember – in no sense a bastion of weak-kneed liberal socialist Krugmanite do-gooders. | |
| 11.20am: Full text of the IMF assessment is here, and here are the key passages: | |
| • Growth is likely to remain modest in the next two years, constrained by household deleveraging, fiscal restraint, and subpar global demand. | |
| • The United States remains vulnerable to contagion from an intensification of the euro area debt crisis. | |
| • Failure to reach an agreement on near-term tax and spending policies would trigger a severe fiscal tightening in 2013, threatening the recovery. | |
| • Promptly raising the debt ceiling would help reduce uncertainty and avoid the risk of losses in confidence and financial market instability as the deadline approaches. | |
| • Policymakers should agree as early as possible on a comprehensive set of measures to stabilize the public debt ratio by mid-decade and subsequently put it firmly on a downward path. | |
| • The cost-saving provisions of the health care reform should be implemented fully and additional saving measures could be phased in gradually. | |
| • In light of the importance of the housing market in securing the economic recovery and the downside risks to the outlook, additional steps could be taken to strengthen the housing recovery. | |
| • Active labor market policies, such as training and support for job search, have been shown to improve the employment prospects of the long-term unemployed and thus should be adequately funded. | |
| 11.05am: The IMF's assessment of the US economy – technically known as an Article IV consultation – was gloomy overall but its language will have pleased the White House in several regards, since it endorsed a range of policy platforms that the Obama administration supports in opposition to the Republicans in Congress and in the presidential race. | 11.05am: The IMF's assessment of the US economy – technically known as an Article IV consultation – was gloomy overall but its language will have pleased the White House in several regards, since it endorsed a range of policy platforms that the Obama administration supports in opposition to the Republicans in Congress and in the presidential race. |
| In particular was Lagarde's clear warning that budget cutting on the scales being talked about in Republican circles could do serious damage to both the US economy and the rest of the world. "Too strong a contraction as a result of the fiscal cliff would have severe spillover effects outside the United States," Lagarde said in her press briefing at the IMF's headquarters in Washington. | In particular was Lagarde's clear warning that budget cutting on the scales being talked about in Republican circles could do serious damage to both the US economy and the rest of the world. "Too strong a contraction as a result of the fiscal cliff would have severe spillover effects outside the United States," Lagarde said in her press briefing at the IMF's headquarters in Washington. |
| Instead, US fiscal consolidation has to be "sensible and certainly not excessive," according to Lagarde – meaning that budget cuts of about 1% of GDP "would be perfectly appropriate". | Instead, US fiscal consolidation has to be "sensible and certainly not excessive," according to Lagarde – meaning that budget cuts of about 1% of GDP "would be perfectly appropriate". |
| The implication is that the IMF is warning the US against the sort of dramatic, swingeing budget cuts seen in the UK, for example. | The implication is that the IMF is warning the US against the sort of dramatic, swingeing budget cuts seen in the UK, for example. |
| Indeed, the IMF staff warn that even the cuts proposed by the current administration may be too big, given: | |
| the weak economy and downside risks, the limited room for monetary policy to offset the fiscal drag, and the risk that prolonged economic slack could reduce potential output through skill erosion and the exit from the labor market of discouraged workers. | |
| 10.50am: The IMF's managing director Christine Lagarde took the helm of the Fund's press conference to discuss the latest forecast for the US economy – and she five times used the word "tepid" to describe the state of the US economy. | |
| And that is indeed to IMF's message: just 2% GDP growth this year, well below the US's traditional rate of expansion even if in positive territory. But unlike some other forecasters – including the Federal Reserve – the IMF expects the tepid rate of growth to remain lukewarm next year as well, with 2.3% growth in 2013. | And that is indeed to IMF's message: just 2% GDP growth this year, well below the US's traditional rate of expansion even if in positive territory. But unlike some other forecasters – including the Federal Reserve – the IMF expects the tepid rate of growth to remain lukewarm next year as well, with 2.3% growth in 2013. |
| 10.30am: There's another gloomy forecast on the US economy, this time from the influential International Monetary Fund's latest assessment – suggesting that the Obama re-election campaign may continue to struggle with the consequences. | 10.30am: There's another gloomy forecast on the US economy, this time from the influential International Monetary Fund's latest assessment – suggesting that the Obama re-election campaign may continue to struggle with the consequences. |
| The IMF's economists expect US growth to remain "tepid" until the end of 2015 – although the Fund also warned against overly-harsh budget cutting of the depth being pushed by the Republicans in Congress. | The IMF's economists expect US growth to remain "tepid" until the end of 2015 – although the Fund also warned against overly-harsh budget cutting of the depth being pushed by the Republicans in Congress. |
| Meanwhile, the Republican party's brief internal ceasefire on healthcare in the wake of last week's supreme court decision appears to have ended, with the party's Senate leader Mitch McConnell admitting that "the odds are against" repealing President Obama's healthcare reforms. | Meanwhile, the Republican party's brief internal ceasefire on healthcare in the wake of last week's supreme court decision appears to have ended, with the party's Senate leader Mitch McConnell admitting that "the odds are against" repealing President Obama's healthcare reforms. |
| McConnell's remarks set off a storm of criticism within conservative Republican circles, where opposition to "Obamacare" remains intense, and criticism of Chief Justice John Roberts is becoming increasingly vocal. | McConnell's remarks set off a storm of criticism within conservative Republican circles, where opposition to "Obamacare" remains intense, and criticism of Chief Justice John Roberts is becoming increasingly vocal. |
| Here's a summary of the latest news from Ryan Devereaux: | Here's a summary of the latest news from Ryan Devereaux: |
| • Florida governor Rick Scott says his state will not expand its Medicaid programme in the wake of the supreme court upholding President Obama's signature healthcare legislation. With more than a fifth of its residents uninsured, Florida now becomes the largest state in the union to say it will opt out of the expansion. Last week we detailed how the medicaid expansion issue may become a political football in the ongoing debate over health care. | • Florida governor Rick Scott says his state will not expand its Medicaid programme in the wake of the supreme court upholding President Obama's signature healthcare legislation. With more than a fifth of its residents uninsured, Florida now becomes the largest state in the union to say it will opt out of the expansion. Last week we detailed how the medicaid expansion issue may become a political football in the ongoing debate over health care. |
| • If you're still confused about what the supreme court's healthcare ruling means, you're not alone. According to a new poll from the Pew Research Center, a lot of Americans are confounded; just 55% of the public knows that the Supreme Court upheld most of the health care law's provisions; 45% say either that the court rejected most provisions (15%) or do not know what the court did (30%). Meanwhile, of those who do think they know what the ruling is all about, 40% say they disapprove of the decision, while 36% approve and nearly a quarter offer no opinion. | • If you're still confused about what the supreme court's healthcare ruling means, you're not alone. According to a new poll from the Pew Research Center, a lot of Americans are confounded; just 55% of the public knows that the Supreme Court upheld most of the health care law's provisions; 45% say either that the court rejected most provisions (15%) or do not know what the court did (30%). Meanwhile, of those who do think they know what the ruling is all about, 40% say they disapprove of the decision, while 36% approve and nearly a quarter offer no opinion. |
| • In his latest campaign ad, President Obama accuses Mitt Romney of being a "pioneer in outsourcing". It's a claim that Romney's campaign has consistently disputed, pointing to a Factcheck.org analysis that challenges the president's claim. Obama's team has dismissed the analysis and even wrote a letter to challenge the site's conclusions. The new ad is a sign that Obama administration is going to stick to its narrative and is running in nine politically important states, including Colorado and Virginia. | • In his latest campaign ad, President Obama accuses Mitt Romney of being a "pioneer in outsourcing". It's a claim that Romney's campaign has consistently disputed, pointing to a Factcheck.org analysis that challenges the president's claim. Obama's team has dismissed the analysis and even wrote a letter to challenge the site's conclusions. The new ad is a sign that Obama administration is going to stick to its narrative and is running in nine politically important states, including Colorado and Virginia. |
| • Eric Holder says the Republican party has used him as a "proxy" to attack the president. Holder has found himself the focus of a house investigation, spear-headed by Republican Darrell Issa. Last week the GOP-run House voted to cite Holder for contempt of Congress in a fight over documents related to a botched gunning-running operation undertaken by the Bureau of Alcohol, Tobacco and Firearms, in which the agency allowed thousands of guns to "walk" over the US-Mexico border and into the hands of violent drug cartels. | • Eric Holder says the Republican party has used him as a "proxy" to attack the president. Holder has found himself the focus of a house investigation, spear-headed by Republican Darrell Issa. Last week the GOP-run House voted to cite Holder for contempt of Congress in a fight over documents related to a botched gunning-running operation undertaken by the Bureau of Alcohol, Tobacco and Firearms, in which the agency allowed thousands of guns to "walk" over the US-Mexico border and into the hands of violent drug cartels. |
| • Mitt Romney plans to make a trip to Israel this summer to woo prime minister Benjamin Netanyahu and other Israeli leaders. The exact details of the former governor's Israel policy remain unclear, but he has said plans to "do the opposite" of president Obama. | • Mitt Romney plans to make a trip to Israel this summer to woo prime minister Benjamin Netanyahu and other Israeli leaders. The exact details of the former governor's Israel policy remain unclear, but he has said plans to "do the opposite" of president Obama. |
| • Meanwhile, the Republican party's presidential hopeful is enjoying a week with his family at their $8m estate in New Hampshire. Each year the Romney clan gathers in Wolfeboro, NH to challenge each other in a variety of games – such as who can pound the most nails into a board in two minutes and who can hang from a pole the longest – the family wear coordinated outfits and everybody chips in by picking a daily chore from the "chore wheel". | • Meanwhile, the Republican party's presidential hopeful is enjoying a week with his family at their $8m estate in New Hampshire. Each year the Romney clan gathers in Wolfeboro, NH to challenge each other in a variety of games – such as who can pound the most nails into a board in two minutes and who can hang from a pole the longest – the family wear coordinated outfits and everybody chips in by picking a daily chore from the "chore wheel". |