Further distancing itself from its history of advocating economic conservatism, the International Monetary Fund on Wednesday urged the US government to offer relief to its most vulnerable citizens.
The IMF called on the United States to increase the federal minimum wage and a tax benefit aimed at boosting low and middle income workers. The supranational organization made the pro-stimulus, pro-labor commentary in a memo to world leaders ahead of a two-day G-20 summit in Shanghai, which starts Friday.
Citing worries about financial instability in China, the IMF called on heads of state to enact “a comprehensive policy response both at the national and the G-20 level.” The fund said that means fiscal policies designed at boosting “expected future incomes.”
It suggested the US pursue “an expansion of the earned income tax credit, [and] an increase in the federal minimum wage” to this end.
The federal minimum wage is currently $7.25 per hour. Congress considered a bill in 2014 that would have increased it to $10.10 per hour. Senate Republicans—then in the minority—were able to block the legislation from advancing in the upper chamber.
Last year, the Earned Income Tax Credit (EITC) paid out a total of $66.7 billion to 27.5 million low and middle income Americans (the average beneficiary received about $2,400). Taxpayers are eligible for the benefit based on how much they make and how many children they have. Prominent Republican and Democrat leaders in recent months have called on Congress to grant more EITC benefits to childless taxpayers.
Established by the US and Western European countries after the Second World War, the IMF acts as the world’s central bank, in many respects; most notably, as a global lender of last resort. It has used its position to routinely advocate for conservative policies in exchange for help, such as budget-slashing initiatives and reforms that create labor market “flexibility.”
In 2012, however, it made a stark admission about its outlook–at least concerning the effectiveness of debt hawkishness. The IMF’s leading economist said that its outlook has “been consistently too optimistic for countries that pursued large austerity programs,” as The Washington Post’s Brad Plumer noted at the time.
“In the 1990s, the fund was famous (or infamous, if you prefer) for ordering countries with debt troubles to tighten their belts,” Plumer wrote. “But now the IMF is urging countries in the euro zone, such as Netherlands and France, to loosen up a bit.”
In 2014, signaling that it had also relaxed attitudes toward labor market interventionism, the IMF for the first time in its history called on the US to raise the federal minimum wage. It also then called on Congress to expand the EITC.
