US better get significant about deficit reduction according to IMF report

The United States is in no position to lecture about their financial condition, especially after an evaluation from the International Monetary Fund (IMF). The majority of the report tells any person following the news what they already know: there’s an economic recovery in progress, but high unemployment is dragging down consumer spending by quite a bit. Nevertheless, the IMF report also disagrees with the Obama administration’s outlook on the economy, and recommends harsh deficit reduction measures to help the U.S. get back to financial health. Politically, most will never fly.

IMF report really enjoys the stimulus package, pans deficit reduction efforts

Until now, the United States and China refused to let the IMF go beyond the general economic survey that is performed annually on all its members. But the U.S. let the IMF to get more specific under the fund’s Financial Sector Assessment Program. The Associated Press reports that the IMF said the U.S. economic recovery “has proved stronger than we had earlier expected” and gave credit to the stimulus package, calling it a “powerful and effective policy response” on the part of the government. Going forward, they were less positive about the US government deficit.

Cut Social Security, tax gas, and end home mortgage interest deduction

Concerning the U.S. government deficit, the IMF said that in the aftermath of the stimulus package, the Obama administration will have to raise taxes to get the U.S. deficit down to a manageable level. The Washington Post reports that IMF recommendations involved cutting Social Security, ending the deduction for interest on home mortgages and taxing gasoline.

IMS suggests US is too optimistic about deficit

The IMF report also said the Obama administration was overestimating U.S. economic growth and needed to trim the U.S. government deficit by hundreds of billions of additional dollars if its announced budget targets are to be met. It was reported by Automated trader.com that those spending budget targets consist of halving the deficit by 2013 and stabilizing public debt at 70 percent of gross domestic product by 2015. The IMF projects that current policies will push the debt level up to 95 percent of GDP by 2020 and over 135 percent by 2030.

Administration for Obama disagrees with IMF report

The IMF assessment of the U.S. government deficit outlook is disputed by the Obama administration. In the Associated press article, a U.S. official said the IMF had used forecasts for economic growth and interest rates which were too pessimistic compared to the consensus of most private forecasters, with the impact of inflating the U.S. government’s deficit problem over the next decade.

IMF deficit reduction suggestions political suicide

The IMF’s recommendations for the U.S. are the very same as those it made for European countries. Those are politically impossible. Allowing homeowners to deduct their mortgage interest payments from their income taxes has become an inalienable right to Americans. The IMF panned the deduction, saying it was part of a homeownership system that was “costly, inefficient and complex,” did not increase ownership rates compared to other countries without the very same tax incentives, and mostly benefited “the better-off.”

More details accessible at these sites:

Associated Press
google.com/hostednews/ap/article/ALeqM5iP9zjiClXKpjY6n7AS3qlbrb964gD9GR65C80
Washington Post
washingtonpost.com/wp-dyn/content/article/2010/07/08/AR2010070806116.html
Automated Trader
automatedtrader.net/real-time-dow-jones/4045/2nd-us-needs-plan-to-bring-down-debt-without-hurting-growth_imf