With statements by foreign leaders about the debt ceiling making daily headlines, it is worth asking what the international organizations charged with managing the global economy say about U.S. fiscal policy. For countries that borrow money from the International Monetary Fund, what the IMF says can change the decisions of governments and affect financial markets. But when countries receive only advice and not money, how much leverage can the IMF have?
In a forthcoming paper in International Studies Perspectives, we have answered this question by studying how Congress and the White House used information from the IMF’s review of the U.S. economy in the summer of 2011. The summer of 2011 is an important time to study the impact of IMF surveillance since it was the last time that Washington went down to the wire over raising the debt ceiling. Though the fund’s review of the U.S. economy was publicly available on the IMF’s website, and though it contained plenty of tough talk and big ideas about how to fix the country’s problems, there was almost no public discussion of the report by either the White House or Congress. This raises important questions about the impact of the fund’s economic surveillance of member countries.
The goal of IMF surveillance is to make sure that countries adopt policies consistent with both economic growth and currency stability. Since 1999, the IMF’s annual ‘report cards’ on each member’s economy have been publicly available on the IMF’s Web site. The intent behind this reform was to use transparency to put additional pressure on politicians to engage the IMF’s ideas and ultimately adopt policies consistent with the fund’s wishes. The coincidence of the IMF review and the debate about the debt ceiling make for an important case about the fund’s influence. The IMF’s team met with U.S. officials in May and June of 2011, with the final report being released publicly in July. Meanwhile, debate proceeded between Congress and the White House, with the debt ceiling needing to be raised before Aug. 2 of that year.
Just as it can be difficult to talk critically about your boss, making IMF surveillance meaningful when talking about the organization’s largest shareholder can be a challenge. There is doubtless a strong incentive to minimize problems and accentuate the positive. In the summer of 2011, however, this was not an issue. The final report was anything but a whitewash, referring to the U.S. fiscal position as “unsustainable” seven times. It called for raising the retirement age, cutting Social Security benefits, and creating a national sales tax. It also called for strengthening worker training programs and creating tax incentives for firms to hire the long-term unemployed. In a sense, then, there was something for everyone in this report: conservatives could reference the need for entitlement reform, and liberals could point to the recommendations on strengthening labor policies.
Did these findings make it into the public debate? We read over every speech by members of Congress, every bill submitted, every committee hearing, as well as read through all of the transcripts of White House speeches and press briefings during this time period. Though the fund had drafted a sober document that stressed the need for action based on its own independent information, offering a number of helpful reforms, there were exactly two references to the IMF by members of Congress during this time frame. Both referred obliquely to the IMF’s criticism of the U.S. fiscal situation, but then turned from this to make very different arguments: one criticized the idea of a supercommittee, and the other called for a Balanced Budget Amendment. There were no references by the White House to the IMF’s findings, even though there were plenty that the Obama administration supported.
This is an important corrective to how we normally think about the effects of transparency. Just because information is available publicly does not mean that it finds its way to policy makers. It also does not mean that the information is conveyed in a straightforward readable fashion. While the fund has done much to address this second issue in recent years, future progress in making surveillance meaningful will require a great deal more outreach and engagement to sell its message. If the fund’s recommendations don’t translate into policy debates when sent blocks away from the U.S. government, it is difficult to hope that they will find traction when received from afar. Just as the fund wishes that Washington would learn lessons from the debt ceiling negotiations in 2011, our findings suggest that the IMF has much to learn about how to better make its messages heard.