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IMF on sidelines as US budget fights brew nearby

Published on NewsOK Modified: January 16, 2013 at 2:28 am •  Published: January 16, 2013

Beyond those immediate issues are broader questions about the United States' long-term financial health, given its massive budget deficits.

The IMF is hardly ignoring these problems. Lagarde talks about them in many of the countries she visits. Last week in Malawi, she urged developing nations to shore up their own economies so they can withstand the effects of any downturns in the United States and Europe.

"If those two advanced economic zones are going into recession, that will have a major impact around the world," she said.

IMF spokesman Gerry Rice says IMF officials do influence U.S. policymakers. They have regular meetings with the Obama administration and members of Congress and have raised concerns about U.S. fiscal policy.

Lagarde occasionally has the ear of Obama directly. The IMF also has other channels with the administration. Lagarde's deputy, David Lipton, was previously a top economic adviser to Obama and former fund officials now serve in the White House.

The IMF also issues policy recommendations for the United States, as it does for all its 188 members. It has urged the United States to gradually reduce its debt with a balance of tax increases and budget cuts. But while many countries eagerly anticipate reports about their economies, knowing they can influence their ability to borrow in international markets, the IMF reports on the United States are seldom cited by American policymakers.

Some analysts have questioned whether the IMF tones down its criticism of United States to avoid problems with a country that provides much of its budget. Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics, said the IMF missed earlier opportunities to raise alarms as the U.S. debt problems were building. He said the fund was too timid last decade in identifying imbalances, including trade deficits and rising spending and tax cuts under the George W. Bush administration.

Rice says the IMF in its analyses treats the United States just as it would any other member.

But a former IMF executive board member, Domenico Lombardi, says the IMF's relationship with the United States is complicated.

"They try to influence with quiet persuasion," said Lombardi, now a fellow at the Brookings Institution. "In practice, they don't want to upset the largest shareholder."