NEW YORK – The United States can take a cue from Mexico in fiscal discipline matters, Federal Reserve Bank of Dallas President and CEO Richard W. Fisher said Wednesday.
“I would go so far as to say there are lessons to be learned here, lessons for the U.S. and even lessons for Europe,” Fisher told a Mexico City audience, according to prepared text of his speech, which was released by the Fed. “Mexico’s achievements have come through both monetary and fiscal reforms. They have worked in concert to provide the blueprint for a stable, strong macroeconomy. For this, Mexicans should be proud. And other nations, including my own, should be inspired.”
Mexico recovered more rapidly than the U.S. from the recession and global financial crisis, with Mexico’s industrial production exceeding its pre-recession peak, while the U.S. still has yet to return to pre-recession levels in production, he said. Mexico’s GDP hit pre-recession levels three quarters fast than the U.S.
Also, Mexico has a federal budget, something the U.S. hasn’t been able to accomplish in three years, Fisher noted. "U.S. fiscal authorities have not gotten their act together to figure out how to construct and implement a budget that restores confidence by reeling in the nation’s long-term deficits and unfunded liabilities while encouraging investment, job creation and risk taking. The Congress of the United States, and those who aspire to the presidency in 2012, might well benefit by broadening their perspective on Mexico from focusing solely on illegal immigration and drug and gun trafficking¯important as those issues are¯and take a chapter from Mexico’s book about implementing real fiscal reform."
“Mexico has a tool that forces the government to hew to fiscal discipline,” Fisher said. “Since 2006, you have had a balanced budget rule, passed into law by your Congress. Deviations are only allowed in emergencies. Thus, even with the emergency situation that triggered a deviation from balance during the Great Recession and global financial crisis, Mexico’s budget deficit as a percentage of GDP was less than one-quarter that of the United States. This is a fact: Your government has implemented greater fiscal discipline than mine and has done so in a way that has not hampered economic recovery.”