'Something will have to give:' IMF sounds alarm on US debt

The International Monetary Fund (IMF) warned Tuesday that America’s recent economic performance is partially the result of the country’s unsustainable fiscal practices, creating risks for the global economy.

“The exceptional recent performance of the United States is certainly impressive and a major driver of global growth, but it reflects strong demand factors as well, including a fiscal stance that is out of line with long-term fiscal sustainability,” the IMF wrote in its latest World Economic Outlook.

“This raises short-term risks to the disinflation process, as well as longer-term fiscal and financial stability risks for the global economy since it risks pushing up global funding costs,” it continued. “Something will have to give.”

The IMF projected that the U.S. economy will grow 2.7 percent in 2024, an upward revision of 0.6 percentage points from January and well above the projections for its fellow advanced economies.

“The strong recent performance of the United States reflects robust productivity and employment growth, but also strong demand in an economy that remains overheated,” Pierre-Olivier Gourinchas, the IMF’s chief economist, said in a blog post.

“This calls for a cautious and gradual approach to easing by the Federal Reserve,” he added.

Congress voted last spring to suspend the debt limit as part of a larger bipartisan deal aimed at reining in annual government funding with budget caps. At the time, the national debt stood at roughly $31.4 trillion, and has since risen by trillions more dollars in the past year, according to the Treasury Department. 

In its long-term budget outlook report released earlier this year, the Congressional Budget Office estimated the national deficit would rise “significantly in relation to gross domestic product (GDP) over the next 30 years, reaching 8.5 percent of GDP in 2054.”

The nonpartisan budget scorekeeper cited rising interest costs among the drivers behind the projected growth, in addition to “large and sustained primary deficits, which exclude net outlays for interest.”