Global economists are warning that the United States needs to explain how it’s going to cap a government spending gusher before American debts contribute to another crisis.
In the last week alone, the IMF , the Organization for Economic Cooperation and Development and the Chinese government have urged the Obama administration to outline spending controls.
The Paris-based OECD said Thursday that a hike in U.S. interest rates “should not be delayed beyond the last quarter of 2010.”
“Countries at risk of losing confidence in financial markets also need to strengthen government finances more rapidly,” the report concluded.
The OECD, a government-sponsored think tank, is made up of the United States and 30 other developed countries.
International Monetary Fund economist Carlo Cottarelli said Wednesday that the “most important” step was for the U.S. government to outline a plan to “eliminate uncertainty about the future fiscal picture.”
Earlier this week in Beijing, the Chinese government pressed Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke to explain U.S. plans to deal with the rapid growth of the national debt.
China is America’s biggest creditor. In March, its official holdings came to $895.2 billion. Some economists say that figure is low because it does not include bonds bought by the Chinese through the London market.
Bernanke made his own plea for a debt plan in a speech last month in Dallas. But the Fed chief has cautioned against raising interest rates too quickly.
Many economists are warning that the financial crisis brought on by heavy household and banking debts could become a government debt crisis.
Several European countries are making deep cuts in salaries and pensions to maintain confidence among bond holders.
Earlier this month, the European Central Bank, the IMF and the countries that use the euro as their currency produced a trillion-dollar rescue plan to halt a run on the euro.
That led the Senate to pass a measure sponsored by Sen. John Cornyn , R-Texas, telling the White House to oppose any IMF bailouts for countries unlikely to pay their loans.
Cornyn said he offered the measure after the IMF joined European governments in offering loans to Greece. The Greek government owes banks more than $400 billion, a figure well in excess of its national income.
“We should not be loaning money to such a nation unless we’re absolutely confident that our taxpayers are not subsidizing failure and will ultimately get their money back,” Cornyn said.
IMF officials say their loans require them to be repaid before other creditors.
Cornyn’s lending caution is widely echoed in China. Economists and ordinary Chinese have used the Internet to debate the wisdom of lending to the United States.
The U.S. debt was expected to surpass $13 trillion Thursday.
By Jim Landers – dallasnews.com
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