Earlier this week, the Bank of England Governor, Mervyn King, irked US authorities by pointing out that even the world\u2019s economic superpower has a major fiscal problem -\u201ceven the United States, the world\u2019s largest economy, has a very large fiscal deficit\u201d\u009d were his words. They were rather vague, but by happy coincidence the International Monetary Fund has chosen to flesh out the issue today. Unfortunately this is a rather long post with a few chunky tables, but it is worth spending a bit of time with \u201d\u201c the IMF analysis is fascinating.<\/p>\n
Its cross-country Fiscal Monitor is not easy reading and is a VERY big pdf (17mb), so I\u2019ve collected a few of the key points. The idea behind the document is to set out how much different countries around the world need to cut their deficits by in the next few years, and the bottom line is it\u2019s going to be big and hard (ie 8.7pc of GDP in deficit cuts around the world, which works out at, gulp, about $4 trillion).<\/p>\n
But the really interesting stuff is the detail, and what leaps out again and again is how much of a hill the US has to climb. Exhibit a is the fact that under the Obama administration\u2019s current fiscal plans, the national debt in the US (on a gross basis) will climb to above 100pc of GDP by 2015 \u201d\u201c a far steeper increase than almost any other country.<\/p>\n