IMF Agrees w/Cheney: Deficits Don't Matter for US

Here we go again: for everyone else--especially the likes of Egypt, Pakistan and so forth, deficits do matter. But for the United States which (they say) has little funding its current account deficit, it's not really a problem. In essence it's the IMF approving of American deficits as per Dick Cheney's famous dictum that "deficits don't matter." To be exact, there's always the qualified economistic wording about how short-term fiscal consolidation is not required but rather stimulative policies to get the economy unstuck or suchlike. Instead, the real fiscal challenge for the United States is in the medium- to long-term when it must deal with its health care and pensions unfunded liabilities as baby boomers retire en masse:

Here is the IMF head honcho on the subject matter:

The U.S. economy would be faring much better were it not for the "self-inflicted" wound of tighter fiscal policy, the head of the International Monetary Fund said on Tuesday. "The U.S. is not doing as well as it could be, because of self-inflicted fiscal wounds. This year alone, fiscal adjustment will constitute an enormous 2.5 percent of GDP," IMF Managing Director Christine Lagarde said at the Brookings Institution.

She said the challenge was not the near-term fiscal outlook for the longer-term one, given the pressures of healthcare and Social Security spending. "The next couple of years are going to be quite positive looking. But if nothing is done about the medium and long-term horizon ... then the picture is a lot bleaker," Lagarde said. "This is the major challenge facing the U.S. economy today, and it must be met."

I am beginning to wonder when the medium- and long-term will arrive since they never seem to come when the IMF speaks about the US. It's in essence a free pass. Actually, the Yanks have a term for delaying the inevitable time and again in plain English: "kicking the can down the road."