IMF: The US will solve its growth problem when it solves its poverty problem

The International Monetary Fund released a preliminary report
on Wednesday that predicted the US economy will grow 2.2% this year, and 2.5% in 2017.

But the report also warned of a dangerous “confluence of forces” in the US that could inhibit continued growth.

These forces include declines in productivity, crumbling infrastructure, and a rising share of workers going into retirement.

The most important forces are the trends in income, however. Namely, one in seven Americans lives in poverty, and the middle class has shrunk to its smallest size in the last 30 years. According to the IMF, the US’s problem of i
ncome inequality is contributing to the problem of our
growth slowdown.

“There is an urgent need to tackle poverty,” the report states. “If left unchecked, these forces will continue to drag down both potential and actual growth.”

What the US needs is to encourage work to combat the falling labour force participation rate, according to Christine Lagarde, the managing director of the IMF, who published a blog post on the Huffington Post about the report.

“Not only does poverty create significant social strains, it also eats into labour force participation,” Lagarde wrote.

The report called on the US to make efforts to improve education, subsidise childcare for lower-income families, provide a more generous income tax credit, and raise the federal minimum wage. Encourage people to work who may not have been working, the IMF recommends, and growth might start accelerating again.

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