The United States has been handed a dose of European medicine as the International Monetary Fund advised the government to raise its debt ceiling soon.
There is not much leverage behind the IMF's advice, but there it is. The IMF Monday said Congress should raise its federal debt ceiling soon or risk disrupting the global and the U.S. economic recoveries. It also lowered its global and U.S. growth projections -- all on the eve of a two-day appearance on Capital Hill by U.S. Federal Reserve Chairman Ben Bernanke.
Of course, the IMF cannot stop Washington from its own self-inflicted setbacks dictated by partisan politics despite the frailty of the recovery. U.S. consumers have now cut back on spending for three consecutive months and manufacturing continues to falter. Behind all that, job growth is in a summertime stall with numbers that fall far short of what is needed to lower the unemployment rate.
The IMF lowered its economic growth assessment for the United States from 2.1 percent this year to 2 percent. In 2013, the IMF projects the U.S. gross domestic product will climb 2.3 percent.
Analysts say these growth rates are not good enough to lower unemployment. To do that, GDP expansion of 3.5 percent or better is required, economists say.
In spite of this, House Speaker John Boehner, R-Ohio, has already said he is perfectly willing to drag Washington back through another debt ceiling debate similar to the one last August that gave credit rating firm Standard & Poor's excuse enough to lower the U.S. credit rating.
Bernanke, meanwhile, will play the artful dodger, agreeing that a stimulus program has an appealing ring to it while failing to commit to any particular program or schedule. The chairman's job on Capital Hill is to remind lawmakers that the central bank makes its own decisions, thank you kindly. Secondly, Bernanke will politely hint that Congress has its own work to do. He will echo the IMF's advice. A second round of public bickering over the budget won't help the recovery at all and could certainly slow it down.
"Uncertainties about the fiscal outlook in the United States present a particular latent risk to global financial stability," said Jose Vinals, financial counsellor and director of the IMF Monetary and Capital Markets Department.
As clear and accurate as that might be, that kind of warning does not have much chance of being heard in Washington, where bickering is the order of the day despite the point that it is exactly what business does not need.
In international markets Tuesday, the Nikkei 225 index in Japan rose 0.35 percent while the Shanghai composite index in China gained 0.62 percent. The Hang Seng index in Hong Kong added 1.75 percent while the Sensex in India was flat, rising 0.01 percent.
The S&P/ASX 200 in Australia climbed 0.87 percent.
In midday trading in Europe, the FTSE 100 index in Britain slipped 0.17 percent while the DAX 30 in Germany gained 0.65 percent. The CAC 40 in France added 0.69 percent while the Stoxx Europe 600 rose 0.19 percent.
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