IMF Sends Urgent Warning to Biden Admin Regarding Escalating Debt Crisis

IMF Issues Warning to Biden Administration Over Escalating Debt and Inflation Risks

The International Monetary Fund (IMF) has raised concerns about the Biden administration's substantial spending and the resulting surge in U.S. debt, citing "significant risks" to the global economy and the potential for continued high inflation.

In its latest World Economic Outlook released last Tuesday, the IMF acknowledged the impressive economic performance of the United States but cautioned that it stems partly from unsustainable fiscal policies. The IMF highlighted the risk of short-term inflationary pressures and long-term fiscal instability, emphasizing that adjustments will be necessary.

The IMF noted that the U.S. is projected to run a fiscal deficit of 7.1% in 2025, significantly higher than other advanced economies. Vitor Gaspar, director of the IMF's fiscal affairs department, criticized America's "loose fiscal policy," which he believes contributes to higher global interest rates and funding costs for other countries.

Gaspar urged caution and a gradual approach to monetary policy adjustments by the Federal Reserve to mitigate these risks. However, despite the IMF's warnings, the Biden administration continues to pursue expansive fiscal measures.

The administration recently proposed a massive $7.3 trillion budget for fiscal year 2025, which, if approved, would lead to a projected national debt of $45.1 trillion by 2034, surpassing 105.6% of GDP. Additionally, shortly after the IMF's warning, the House of Representatives passed a $95 billion foreign aid package for Ukraine and Israel.

Meanwhile, the latest Consumer Price Index report showed persistent inflation at 3.8%, prompting Federal Reserve Chairman Jerome Powell to delay expected rate cuts until inflation moderates.

The IMF's cautionary message underscores the need for immediate action to address the $34 trillion national debt, but such measures are unlikely as long as the current political landscape remains unchanged.