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I'm an American citizen. I'm embarrassed. The US Congress again has failed to include in the omnibus budget bill finally passed by the House (and now going to the Senate) the trivial amount needed for the United States to finally approve critical changes at the IMF: a doubling of its resources and reform of its antiquated governance. A short summary of why this is embarrassing and costly for the United States is here. How far it takes us from what used to be a bipartisan consensus on the US role in the world is here. Why it’s a USA own-goal is here.
Fortunately the Federal Reserve, which is not constrained by the political paralysis gripping Congress, has made up some of the US leadership deficit. In this piece, my colleague Arvind Subramanian salutes Ben Bernanke's leadership at the Fed, which provided remarkable support for emerging markets through swap lines after the Lehman failure, and for Japan and Europe subsequently by providing liquidity at critical moments. The Fed has substituted for an IMF politically and financially weakened by US inaction.
The dollar is still in demand, and "Ambassador Ben" deployed it well. But that might not be the case indefinitely (Arvind calls the Fed a "vestigial" source of American strength). At some point the US must reassert its international leadership, starting with a return to support for the international institutions like the IMF that were shaped by US values and ambitions. If not, the risks to progress toward a more stable and prosperous world, including not only to Americans but to the world’s least fortunate people in the poorer countries, will continue to mount.