Like Nik Wallenda inching his way high above Niagara Falls, the U.S. economy is walking a fine line. What will keep us from falling off this tightrope is prudent investing by the government in creating jobs while at the same time chipping away at its massive debt.
So says Christine Lagarde, minister of the International Monetary Fund.
The good news is that since the United States officially emerged from recession in summer of 2009, it has maintained slow but steady growth.
The bad news is that this 2 percent growth is still too weak to generate needed investments by manufacturers to create jobs. For 2013, growth is expected at a still anemic 2.3 percent.
Lagarde fears two things could tip the basket toward another recession.
One is too drastic of spending cuts in the United States that could contract the little growth we are seeing.
The second harbinger of doom is if Congress refuses to lift the debt ceiling.
Lagarde is talking indirectly to House Speaker John Boehner, R-Ohio, and his threat that come August he will again wage battle against raising the debt ceiling, unless it is offset with larger spending cuts.
Last year, if you remember, Boehner almost single-handedly brought the U.S. economy to a halt with his obtuse leadership.
Lagarde recommends a reduction of government spending by 1 percent of the gross domestic product, “no more than that.” The GDP is a measure of marketable output, in other words, how healthy U.S. industries are.
This slow but steady whittling away at the deficit should occur over the next 10 years, Lagarde said. Any more drastic and her fear is it would stall the economy.
Lagarde represents a worldwide consortium of 188 members whose goal is to recommend economic measures to keep the world economies afloat.
The IMF is separate from any government and is recognized as the one institution that for more than 60 years has the world’s economic wellbeing as its mission.
THE REALITY is that we’re in for a long, hard slog to recovery.
Perhaps this time we’ll learn the lessons of what a real economy is built on.
— Susan Lynn
