The International Monetary Fund (IMF) produces an annual report on the state of the world’s largest economy, known as an Article IV report. The current report ought to act as a wake-up call to the US establishment, but will probably fall on deaf ears.
The report notes that the US economy is about to break its record (next month) for the longest period of sustained growth. The economy has managed to expand consistently since the depths of the Global Financial Crisis in 2009. It was coming of a low base following the worst economic depression since The Great Depression of the 1920s (1929 to 1939). However, despite a decade of growth, many Americans have experienced poverty, stagnant living standards and a decline in life expectancy.
The report advocates more generous in-work benefits for those on low incomes, an increase in the minimum wage, increased spending on education, anti-poverty measures and an initiative to tackle opioid addiction (frequently as a result of pain medication) and related deaths. It notes that despite unemployment being at a 50-year low “the benefits from this decade-long expansion have not been widely shared”.
According to a summary in The Guardian newspaper, the report noted:
The impact of rising suicides and drug overdoses on falling life expectancy, now one of the lowest in the G7.
A rise of just 2.2% in inflation-adjusted incomes for the median US household since the end of the 1990s, even though per capita incomes have risen by 23%.
A decrease in wealth among the poorest 40% of the population since 1983.
The fact that 45 million Americans live in poverty.
An erosion of social mobility so that half of today’s young American adults earn less than their parents did at a similar age. Forty years ago the figure was 10%.
Poor education outcomes by international standards despite devoting a bigger slice of national income to schools and colleges.
“Addressing the growing divergences between the aggregate fortunes of the real economy and the standard of living for the bulk of the US population is complex and will require action on many fronts” the report noted. The report suggests that as the tax cuts brought in by the Trump administration work their way through the system that growth will slow from 2.6% this year to 2% next year (a Presidential election year). The report expressed concerns over current US trade disputes and the protectionist attitude of the US administration:
“A deepening of ongoing trade disputes or an abrupt reversal of the recent ebullient financial market conditions represent material risks to the US economy”.
The sombre nature of the article IV report does not fit into the bullish pronouncements of Mr Trump in which he infers that a strong economy is good for all Americans, so the report is likely to be filed as “fake news” as far as the President is concerned – the average American may disagree.