International Policy

IMF's Advice To The U.S.

Every year, the International Monetary Fund visits member countries and makes recommendations to "improve" those countries' fiscal policies. On Tuesday, the U.S. received its IMF report card.

While the U.S. generally received a favorable review, critics point out that some of the IMF's recommendations reveal its Keynesian biases.

  • Clinging to the theory that economic growth causes inflation, the IMF wants monetary policy tightened if the economy "reasserts itself."

  • A clear rejection of supply-side economics is evident in the agency's advice against "premature calls for net tax cuts and/or spending increases."

  • The IMF would reform Medicare through payroll tax increases, further constraints on payments to providers, charging beneficiaries more and increasing the age of eligibility -- precisely what has been done over the last 20 years, to no avail.

  • Suggestions for reforming Social Security include "small increases in contribution rates and reductions in benefits" -- excluding "more radical approaches" such as "privatization."

Out of 182 member countries, the U.S. is the IMF's single biggest contributor -- footing 18.25 percent of its budget.

Source: Editorial, "Of IMF Arrogance and Ignorance," Investor's Business Daily, July 16, 1998.

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