Behind the IMF's warning to Biden and Congress on deficit spending

• In the dry language of staff economists, the IMF is sounding the alarm about the "large fiscal slippages" in the U.S. — and the effect continued deficit spending will have on overall public debt.
• China also comes in for criticism.
• "In both economies, public debt is projected under current policies to nearly double by 2053," the report says.
• "How these two economies manage their fiscal policies could therefore have profound effects on the global economy and pose significant risks."

Driving the news: The IMF report — "Fiscal Policy in the Great Election Year" — was released this week at the fund's spring meetings in Washington.

• It arrives as the cost of servicing the U.S. debt has been getting more expensive all year, with the 10-year Treasury yield closing at 4.6% yesterday. That's up from 4.1% from just six weeks ago.
• Interest payments on the debt are projected to cost $870 billion for the year, according a new analysis from the Committee for a Responsible Federal Budget.

By the numbers: Under President Trump, deficit spending reached new highs as he responded to COVID-19 with a slew of spending packages. The deficit more than tripled to $3.1 trillion in fiscal 2020, up from $984 billion in fiscal 2019, according to the Congressional Budget Office.

• That amounted to a whopping 14.7% of GDP. Deficits also rose because of Trump's corporate tax cuts.
• Biden began his presidency by ramming a $1.9 trillion stimulus package through Congress with only Democratic votes. That contributed to a $2.8 trillion deficit in FY 2021 (12.1% of GDP).
• In Biden's first full year as president, FY 2022, the federal government spent $1.4 trillion more than it raised in revenue (5.4% of GDP). In FY 2023, the deficit jumped up to $1.7 trillion (6.3% of GDP).

What they're saying: The White House says it plans to lower deficit spending by $3 trillion over 10 years, and blames Republicans in Congress for not working with Biden to increase taxes on corporations and the wealthy to raise more revenue.

• "The Trump tax cuts added $2 trillion to the debt with unpaid giveaways skewed to the wealthy and big corporations, and now congressional Republicans are proposing another $5.5 trillion in tax cuts skewed to the rich," White House spokesperson Michael Kikukawa told Axios.

Between the lines: Biden frequently claims he reduced the deficit by a trillion dollars. His math isn't wrong, but it's a little misleading.

• He's comparing FY 2021 numbers (which were juiced by COVID spending) with FY 2022 numbers (when the pandemic was receding).
• Independent fact checkers have labeled his claim "half true."

• Biden's latest budget does contain $3 trillion in deficit reduction, which he hopes to achieve by rolling back Trump's tax cuts and raising taxes on billionaires and large corporations.
• Even if the Biden administration persuaded Congress to raise those taxes, his long-term deficits would still be well historic norms, Axios's Neil Irwin notes.

Zoom out: When it comes to deficit spending, the last four presidents have more in common with each other than they might admit.

• President George W. Bush passed massive tax cuts that didn't pay for themselves, as he'd promised.
• In early 2009, with the global economy in tatters, President Obama was in firefighter mode. He wasn't overly concerned with deficit spending when he signed a nearly $1 trillion stimulus bill into law.
• He later codified Bush's tax cuts when he was negotiating with congressional Republicans, which also increased long-term deficits.

Zoom in: Biden has insisted that his Inflation Reduction Act (IRA) — which included billions in climate spending, health care savings and more money for IRS enforcement — would reduce the deficit by $300 billion over 10 years.

• That might have been true at the time. It's doubtful now.
• As part of the debt-ceiling deal, Republicans insisted on cutting IRS funding, which will translate into less revenue for the government.
• The popularity of Biden's EV and other clean-energy tax credits also raised the price tag of the IRA's climate provisions from $400 billion to as much as $1.2 trillion, according to some estimates.

The bottom line: It's not just the U.S. and China that come in for blame from the IMF. Britain and Italy are also in the dog house.

• "China, Italy, the United Kingdom, and the United States ... critically need to take policy action to address fundamental imbalances between spending and revenues," the IMF said.