IMF Chief Criticizes 'Abrupt' U.S. Budget Cuts

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christine lagarde imf chief u.s. budget cuts
Toby Sterling/APIMF Managing Director Christine Lagarde, speaking Tuesday in Amsterdam, criticized U.S. budget cuts, calling them "too tight."
By TOBY STERLIN

AMSTERDAM -- International Monetary Fund head Christine Lagarde criticized the U.S. government's budget policies as too tight Tuesday, in an appearance in Amsterdam that was interrupted by student protestors.

Lagarde said the U.S. government's debt reduction plans are too abrupt, including the $85 billion in federal budget cuts known as the sequester. She said that the current policies would lower the U.S. economy's growth rate.

The IMF's most recent forecast in April said the U.S. economy would expand by 2 percent this year, 1.75 percentage points slower than it would have grown without the tax hikes and spending cuts.

The U.S. "should consolidate less in the short term, but give ... economic actors the certainty that there will be fiscal consolidation going forward," she said.


Lagarde had just begun speaking to students at the University of Amsterdam when the protestors began an organized, chanting disruption. One would call out "mic check!" and dozens more would yell back "Madame Lagarde!"

Then individual students mocked her as supposedly believing that "technocracy is better than democracy" and satirized her as having said that Greeks should "help themselves ... by paying all their tax."

Security guards dragged students away until there were none left shouting, and eventually the interview resumed.

Lagarde defended reforms the IMF had recommended be carried out in Greece, but admitted they had caused a greater economic decline than expected.

"What we underestimated is the consequences, that's clear," she said.

The 17-country eurozone is in recession, and Lagarde and an increasing number of economists now criticize a German-led drive for all members to get their budget deficits under 3 percent as soon as possible.

Lagarde said that the IMF doesn't believe "that austerity and growth are mutually exclusive," but she said the fund doesn't believe austerity policies alone can lead to growth.

She praised a recent European Commission decision to allow France and the Netherlands more time to get their budget deficits down.

"The fact that they are allowing more time is a good move," she said.

One student attempted to pose a question out of turn later in her talk and guards began dragging him away. When he began questioning why Lagarde was only willing to field pre-approved questions, she intervened and asked him to be allowed to pose his question.

The guards allowed him to return, and he asked whether IMF aid doesn't usually end up disproportionately benefiting the rich.

She said economic reforms work better in countries with less income inequality, and the IMF tries to include that in its advice -- which is not always heeded by governments.

"We're not imposing a particular system," she said, "We're trying to be rational about what can actually balance a country."


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7 Comments

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imd89

We contribute more to them & the U.N. than anyother nation, Washington can't find cuts but i can cut both of them to ZERO!!!!!!!!!!!!

May 07 2013 at 3:55 PM Report abuse +1 rate up rate down Reply
mimsysc

Dear IMF,, we are broke

May 07 2013 at 3:49 PM Report abuse +1 rate up rate down Reply
goatcars

Do we REALLY need advice from the Europeans, where every country needs a financial bailout ???? What a jerk !!!

May 07 2013 at 3:09 PM Report abuse +1 rate up rate down Reply
muniman201

All due respect but this woman is an idiot. She must only know what she reads in the NY Times. The USA has NOT cut spending. We have merely slowed the incremental increases that had been built in a while ago. If she is as unaware as she claims, then what does that say for the "Joe-the-plumber" types right here at home??? How disheartenting!

May 07 2013 at 2:51 PM Report abuse rate up rate down Reply
Ray

What a dope. The government has only reduce the increase of spending and she says this? Are all the people in this world nothing but radical libs now?

May 07 2013 at 1:48 PM Report abuse rate up rate down Reply
2 replies to Ray's comment
rich_paddlyrich

The biggest threat to our economy is the tea party who wants to cut programs for the poor and give more tax cuts for the rich.

May 07 2013 at 2:02 PM Report abuse +2 rate up rate down Reply
rich_paddlyrich

Are you aware that John Mccain now calls the tea party the bizzaro party?

May 07 2013 at 2:04 PM Report abuse +1 rate up rate down Reply
viking9343

And we would listen to this Euro trash idiot because?? Europe has not one shread of credibility when it comes to economics. Perpetual 20%+ enemployment, stagnet dying populations of people hooked on social programs. Let them all just dry up and blow away.

May 07 2013 at 1:33 PM Report abuse +2 rate up rate down Reply