Driven by an unprecedented mix of tax cuts, public spending increases, low interest rates and the direct injection of money, the American economy expanded by 0.8 per cent in the last three months of 2010, an annualised rate of 3.2 per cent. But America has been given a stern warning by the International Monetary Fund to rein in its borrowings.
The IMF also offered general support to the British Government's plans to cut spending and borrowing. Speaking at the World Economic Forum in Davos, the Prime Minister David Cameron reiterated the Coalition's determination: "It's going to be tough – but we must see it through.
"The scale of the task is immense, so we need to be bold in order to build this economy of the future. The British people know these things. They understand there are no shortcuts to a better future."
The Chancellor, George Osborne, added that the nation faced a "particularly acute" challenge and a slow recovery: "Recoveries from this kind of debt-fuelled boom and bust tend to be slower and more protracted than those from other kinds of recession."
The Shadow Chancellor, Ed Balls, has called on ministers to rethink their "reckless" plans.
Unlike in the UK – where a shock contraction of 0.5 per cent in the fourth quarter was reported earlier this week – America is enjoying accelerated growth, up from an annualised rate of 2.6 per cent in the third quarter.
Speaking in Davos, the US Treasury Secretary, Tim Geithner, said: "There's much more confidence now that we've got a sustainable expansion." However, he cautioned; "It's not a boom. It's not an expansion that's going to offer a rapid decline in unemployment."
However, doubts persist about whether the current pace of US expansion is sustainable, and her $10trillion national debt. As in the UK, America's fiscal deficit this year will run at about 10 per cent of national income.
Launching the Fund's latest Fiscal Monitor, designed to help police the world's major economies, the IMF's fiscal affairs director Carlo Cottarelli said: "The US has a lot of credibility. This does not imply their credibility can last forever." The Fund criticises the American budget reduction plan for not containing "binding multiyear restrictions on total spending" . It recommends: "In advanced economies where fiscal sustainability has not been a market concern, credible plans going well beyond 2011 need to be put in place urgently to lock in benevolent market sentiment."
Much will now depend on what working arrangements can be reached between Congress and President Obama, after the President offered to work with legislators in his State of the union address earlier in the e week. Some bipartisan spirit was displayed in remarks from the White House press secretary Robert Gibbs: "This is a problem many years in the making and will take a concerted effort by Democrats and Republicans working together to find a solution," he said.
The IMF also criticised Japan for running a similarly large deficit. Of the major industrialised economies, Japan boasts by far the largest national debt, approaching 200 per cent of GDP, proportionately three times that of the UK.
At the moment about half of Japan's long-term government debt is held by its own citizens, habitually hard savers. However, an ageing population means fewer workers able to buy bonds, and any rise in interest rates from the current near-zero levels would add massively to the bill for servicing the debt.
Glenn Uniacke, Senior Dealer at Moneycorp in London, commented; "The US government should be concerned about their longer-term problems. By not focusing on the US deficits and debt pile, any current growth rate is questionable. While the UK Government's actions may possibly send us into a double dip recession, perhaps it would be worth suffering the pain in the short term, in exchange for long-term prosperity."Reuse content