IMF offers tough medicine to bring the U.S. budget deficit under control
07/08/10 01:22 PM ET
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The United States must rein in its deficits sooner than President
Barack Obama wants, the International Monetary Fund (IMF) said
Thursday.
In an annual report on the U.S. economy, the IMF said the U.S. faces a “central challenge” in implementing a “credible fiscal strategy” to ensure that public debt is put on a sustainable path without putting the economic recovery in jeopardy. It predicted the recovery would be slightly
weaker than what’s anticipated by the Obama administration, and that
the U.S. as a result would have to do more to lower its debt. Lawmakers in the U.S. are also worried about adding to record budget deficits, but Obama in recent weeks has warned domestic and foreign audiences not to let stimulating the economy take a complete backseat to deficit cuts. With sluggish labor and housing markets, economists and politicians alike have worried the economy could slide into a double-dip recession. President Barack Obama created a bipartisan fiscal commission to tackle the long-term fiscal problems and has tasked it with drawing up a budget by 2015 that’s balanced when excluding payments on debt interest. According to administration projections, that
target corresponds to a deficit roughly equal to 3 percent of gross
domestic product. A deficit of that size would be about equal to
economic growth and would mean that the level of debt would be
stabilized, the administration has argued. It predicted less economic growth and said a
2015 deficit of closer to 2 percent of GDP is needed to stabilize
debt. Obama’s healthcare reform law “provides a
welcome basis for cost control, but initial savings will be modest
and will hinge on the implementation of many measures,” the IMF
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