US deficit ‘accident waiting to happen,’ institute warns

US deficit ‘accident waiting to happen,’ institute warns

MEXICO CITY - Agence France-Presse
US deficit ‘accident waiting to happen,’ institute warns

Charles Dallara (R), managing director of the Institute of International Finance, says the US budget deficit is exposing risks that might badly effect the global economy. REUTERS photo

The rise in the United States public debt is a serious threat to the whole world if Washington fails to rein it in, the head of the Institute of International Finance warned on Feb. 25.

“You look at the U.S. budget deficit, and you cannot help but feel that this is a serious accident waiting to happen. And not just a serious U.S. accident, but a serious global accident,” IIF chief Charles Dallara told a conference on the sidelines of a G-20 meeting of finance ministers and central bankers.

“Countries that are occasionally immature in their ability to manage their economic affairs as
well as they should -- and that includes most of them -- are going to find that the world is at risk,” Dallara said.

‘Shower of cold water’
“These countries are going to wait for the marketplace to give them a shower of cold water. And we know that when that happens... it can give a shower of cold water to the global economy.”

The non-partisan U.S. Congressional Budget Office estimates that President Barack Obama will finish his first mandate with four consecutive fiscal years showing a deficit above $1 trillion.

Earlier this month an administration official said Obama’s budget for the current fiscal year projects a $1.3 trillion deficit, slightly higher than the $1.296 trillion in 2011.

According to estimates from the International Monetary Fund, the U.S. national debt surpassed the country’s gross domestic product (GDP) in 2011 and should rise to more than 107 percent of GDP this year.

But the U.S. debt remains attractive to international investors, allowing Washington to borrow at extremely low rates.