The International Monetary Fund on Wednesday called on the U.S. government to take more ambitious steps to remedy its huge budget deficit, including by introducing new taxes. In an annual review of the world's biggest economy, the IMF reiterated its position that the Bush administration is not doing enough to reduce its enormous federal budget deficit. President George W. Bush has made multibillion-dollar tax cuts the centerpiece of his economic policy, arguing that without them, the U.S. economy we be far weaker than it is. His administration says it is ahead of schedule on its vow to halve the budget deficit by 2009, but insists that spending cuts—not new taxes—are the correct policy to achieve healthier government finances. “We agree that expenditure discipline should remain central to deficit reduction, but revenue measures cannot be ruled out,” the IMF review said. The U.S. budget deficit will stand at 2.5 percent of gross domestic product (GDP) in fiscal year 2007, “roughly unchanged in three years despite the strong economic expansion,” it said. “With the [Bush] administration indicating that it will achieve its objective of halving the deficit earlier than anticipated, the time is opportune to establish a more ambitious medium-term fiscal anchor,” the IMF said. “With revenues continuing to be buoyant, we would again propose a target of balancing the budget—excluding the Social Security surplus—over the next five years,” the report said. Social Security is the U.S. national pension plan. The IMF said the United States needs to raise its rate of savings to help solve global imbalances, and argued that the Bush administration should consider new taxes on consumer spending, including a national sales tax, a European-style value-added tax, or energy taxation.
