Debt Default Crisis Solved in One Acronym: IMF

We in the United States typically don't like foreigners meddling in our affairs, but every once and a while we have needed it. Of course, one of the great (and awkward) facts about the U.S. is that we would likely not have gained independence (leaving us with a dysfunctional Parliamentary system and more frequent use of the letter "u") if not for the intervention of the French navy and army. And so it is today that perhaps another institution led by a French person can save us.

I refer to the International Monetary Fund. Founded at the Bretton Woods conference in 1944, the IMF has been a vital institution in securing the world's economic stability ever since. Never did this appear clearer than in the 1980s. For the IMF is an institution with a great deal of experience in dealing with debt crises. Not solving such issues, but dealing with them, much like a mechanic who takes your broken car, does some costly repairs, tells you they'll take effect in a few decades, and then demands you keep paying in the interim.

In the 1980s nations throughout the Global South, who had seen rising debts through the late 1970s began to implode, with Mexico in 1982 as the famed first domino (one of those historical markers that is neither inaccurate nor accurate). The IMF stepped in and began introducing policy prescriptions (later joined by the World Bank) called structural adjustment programs. Spearheaded by the U.S. (and especially the Reagan Treasury in his second term), structural adjustment programs were implemented over the next decades in nations from Mexico to Ghana to South Korea.

It is time to bring our creation home. If structural adjustment was good enough for those nations, then why not here? Let me propose a few features of structural adjustment that I think lend itself to becoming our "grand bargain":

1. It Can Happen Fast: Obviously we do not have much time until the default - we don't have the luxury of developing a sophisticated program that meets the particular needs of the United States. However, for the IMF, that should be no problem. As former World Bank chief economist Joseph Stiglitz once noted, IMF teams " have been known to compose draft reports before visiting. I heard stories of one unfortunate incident when team members copied large parts of the text for one country's report and transferred them wholesale to another. They might have gotten away with it, except the "search and replace" function on the word processor didn't work properly, leaving the original country's name in a few places." This is exactly the kind of rapid, "just-do-it" mentality we need to solve our long-term crisis.

2. Republicans Will Love It: Much of the Republican Party program for rebounding the economy and attacking the debt is essentially the same as IMF structural adjustment, so there should be little problem here. IMF adjustment programs include measures to cut all manner of government programs for the poor (food price supports are a popular one), often lead to a general decrease in real wages, encourage privatization of industries, basic services, and deregulation of the financial sector, etc. Plus, the IMF can provide a handy scapegoat for Republicans who want to cut programs that they pretend to support.

3. Democrats Can Like It Too: OK, so if you're one of those "progressive" Democrats the stuff above may not sound great. But hey, you're irrelevant! For some other Democrats however, the IMF is your best ticket past gridlock and to that grand bargain! In fact, structural adjustment has key components of the much heralded super-compromise. Namely, when the IMF in the past has sought to counsel/cajole nations to balance their budgets, they often prescribe a mix of cuts and . . . wait for it, tax increases! They even suggested the U.S. raise taxes significantly back in 2004! Also, the head of the IMF is usually French. Democrats love French people.

Furthermore, if history is any guide, the IMF with its international presence and ability to exert pressure can essentially bypass our democratic system and pressure us into making the needed changes. America, your debt default crisis is solved.