IMF report says U.S. better get significant about deficit reduction

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 what they already know: there’s an economic recovery in progress, but high unemployment is dragging down consumer spending. The IMF report also disagrees with the Obama administration’s outlook on the economy, and recommends some harsh deficit reduction actions to return the U.S. to financial health. Most of them will probably never fly, politically.

Article resource: IMF report says U.S. better get severe about deficit reduction by Personal Money Store

IMF report admires stimulus package, pans deficit reduction efforts

Until now, the United States and China refused to let the IMF go beyond the general economic survey 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. It was reported by the Associated Press 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. But was less optimistic about the outlook for the U.S. government deficit going forward.

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

The IMF said that in the aftermath of the stimulus package, the Obama administration can have to raise taxes to get the U.S. deficit down to a manageable level. It was reported by the Washington Post that IMF recommendations included cutting Social Security, ending the deduction for interest on home mortgages and taxing gasoline.

US too optimistic about deficit says IMF

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 spending budget targets are to be met. According to Automated trader.com, those budget targets consist of halving the deficit by 2013 and stabilizing public debt at 70 percent of gross domestic product by 2015. Nevertheless, the IMF projects that current policies will push the debt level up to 95 percent of GDP by 2020 and to at least 135 percent by 2030.

IMF report disagreed with by Obama administration

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

IMF deficit reduction recommendations could be political suicide

The IMF’s recommendations for the U.S. are the exact same as those it made for European countries. Those are politically impossible. As an example, allowing homeowners to deduct their mortgage interest payments from their income taxes has become a 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 exact same tax incentives, and mostly benefited “the better-off.”

More info available 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