A damning new IMF report pours cold water on the entire Trump agenda

REUTERS/Charles Platiau

IMF Managing Director Christine Lagarde.

The International Monetary Fund released on Tuesday what amounts to an updated assessment of Donald Trump’s economic agenda, and it’s not a pretty picture.

Instructively, the IMF is now giving the United States the sort of social-policy advice it once reserved for emerging-market economies.

The IMF has downgraded US growth forecasts for this year and next: to 2.1% from 2.3% for 2017, and to 2.1% from 2.5% in 2018. But that’s just one of the IMF’s many red flags.

“There are constraints being put on this economy by income polarization and high levels of poverty,” Nigel Chalk, the US mission chief for the IMF, said during a press conference in Washington.

The IMF’s report said there was “significant scope to upgrade federal and state-level social programs to better help the most vulnerable,” and that “the cost and availability of childcare is a constraint to labor force participation. It is also of concern that one-in-four single parent households are living in poverty.”

International Monetary Fund

Echoing the ongoing debate about the death of the American dream of improving living standards, the IMF said that “prospects for upward mobility are waning, and the poverty rate (at 13.5%) is one of the highest among advanced economies.”

The IMF also quietly excoriated Trump and Republican proposals to make sharp cuts to Medicaid that could strip millions of health insurance coverage — and warned about the dangers of financial deregulation.

“Health care policies should protect those gains in coverage that have been achieved since the financial crisis (particularly for those at the lower end of the income distribution),” the IMF said. On financial rules, the report said that “the current approach to regulation, supervision and resolution should be preserved.”

More broadly, the IMF’s assessment suggests Trump’s economic agenda is being derailed by the political chaos surrounding healthcare reform and the Russia investigation.

International Monetary Fund

“The administration’s budget proposes to reduce the fiscal deficit and debt, to reprioritize public spending, and to revamp the tax system,” the IMF said. “However, during the Article IV consultation, it became evident that many details about these plans are still undecided. Given these policy uncertainties, the IMF’s macroeconomic forecast uses a baseline assumption of unchanged policies.”

In other words, don’t expect tax reform, infrastructure spending, or regulatory overhauls anytime soon.

As for Trump’s promise to more than double the US’s rate of economic growth to 4%, since downgraded to 3% by his economic team, the IMF doesn’t buy it: “Growth is forecast to subsequently converge to the underlying potential growth rate of 1.8 percent.”