protectionism ) also remain necessary .
IMF Directors noted that the U . S . external position remains moderately weaker than implied by medium-term fundamentals and desirable policies . Noting that “ Made in America ” policies in recent legislation include provisions that favour goods and services produced in the U . S . or North America , IMF Directors urged the authorities to maintain open trade policies and work to strengthen a rules-based multilateral trading system . Directors welcomed the proposed supplyside policies including expanding access to healthcare and education and incentivising labour force participation but recommended that these policies be implemented in a manner that supports a downward path for public debt .
“ The U . S . administration ’ s policy proposals , as summarised by the President ’ s Budget , are aimed at increasing labour supply ; building human capital and investing in infrastructure , R & D and clean energy . These efforts should both increase potential growth but also raise living standards and reduce poverty . Priorities include addressing inadequate paid leave and high elder and childcare costs ; creating pathways — particularly for lower income workers — to build skills through early childhood education , community college , apprenticeships and worker training ; and creating a more equitable tax system including a global minimum tax on corporate earnings ,” commented the IMF .
IMF Directors also welcomed the climate provisions in the Inflation Reduction Act as a way of decarbonising the U . S . economy .
Policies in focus
Significant fiscal legislation was passed in late 2021 and 2022 that will have a lasting impact in reshaping the U . S . economy . Policies included :
■ Increased spending on roads ; public transit ; ports ; airports ; water ; electricity ; broadband and an electric vehicle charging network ( US $ 517 billion over ten years ).
■ Measures to expand the development and manufacturing of semiconductors through direct spending on research and development , investment tax credits and other incentives for chip manufacturers ( US $ 79 billion over ten years ).
■ Actions to facilitate the transition to a less carbon-intensive economy including new investments in clean energy ; subsidies for solar and nuclear power ; subsidies to purchase electric vehicles and incentives to improve home energy efficiency ( US $ 386 billion over ten years ).
■ Federal subsidies for individuals ’ purchase of health insurance ( US $ 188 billion over ten years ).
This additional spending was partially offset through new tax measures and expenditure savings . The combined net impact of these
Golden Gate bridge ( image : Maarten van den Heuvel , Unsplash ).
The Cloud Gate metal sculpture in Chicago ( Lance Anderson , Unsplash ).
The goal is to move beyond traditional trade deals and develop new partnerships that are aligned with the administration ’ s broader international economic policy
various initiatives is to add around 1½ per cent of 2022 GDP to the fiscal deficit over the next 10 years ( but with a negligible impact on the federal deficit in 2023 ).
“ The Bipartisan Infrastructure Law , the CHIPS and Science Act , and the Inflation Reduction Act are among the most significant public investments in U . S . history and will allow the country to rebuild its infrastructure , develop high-skill manufacturing and create jobs across the U . S . These expenditures are almost completely funded through equitable revenue increases , investments in tax administration and practical budget savings ,” explained the IMF .
Industrial strategy
“ The U . S . administration is pursuing a targeted industrial and innovation strategy that capitalises on the U . S . comparative advantages ; makes supply chains more resilient and secure ; fosters a shift to clean energy and establishes high standards for labour and environmental practices . This strategy may help reverse the hollowing out of the U . S . industrial base and counter unfair subsidies by non-market economies ,” outlined the IMF .
“ The goal is to move beyond traditional trade deals and develop new partnerships that are aligned with the administration ’ s broader international economic policy . This includes using trade to promote supply-chain diversification and the clean energy transition , ensure trust and openness in digital infrastructure and enhance protections for labour and the environment . Several initiatives are underway to advance these objectives including the Indo-Pacific Economic Framework for Prosperity , the Americas Partnership for Economic Prosperity and the U . S . -E . U . Trade and Technology Council ,” it added .
However , the IMF also cautioned that some of the policies put in place to tackle climate change , improve infrastructure and increase the resilience of U . S . supply chains have introduced policy distortions that “ will contribute to global fragmentation .”
“ As the U . S . undertakes legitimate efforts to boost its supply chain resilience , it should avoid favouring domestic producers over imports or creating incentives that lead to a fragmentation of the global system for trade and investment ,” it warned , citing the Inflation Reduction Act and the CHIPS Act . n
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