The International Monetary Fund issued some sharp warnings to the United States and to the Obama Administration. The IMF is concerned about our rapidly growing budget deficit which just today it increased $166 Billion dollars, the most ever in a single day. They also believe that the Obama White House is overly optimistic about GDP growth. The IMF sees the U.S. economy remaining sluggish for years to come as consumers and investors hold on to their money. So, the make up for falling revenues, the International Monetary Fund suggests tax increases, including a national sales tax.
One item in particular has the IMF worried, the Obama health care plan. “Since 2007, the debt held by the public has almost doubled to 64 percent of GDP—the highest level since 1950—and under current policies could reach 95 percent of GDP by 2020. Thereafter, as the impact of the aging population and rising health care costs is increasingly felt, debt will rise further to over 135 percent of GDP by 2030 and continue to increase thereafter.” If the health care plan does not curb costs as Obama predicts, then the IMF says “If excess cost growth persists, consideration should be given to other measures such as reducing tax exemptions for employer health insurance contributions.”
The IMF report, titled “2010 Statement Article IV Mission“, also sees trouble in the housing sector, which could impact the financial sector, just as it did in 2007-2008. “On the downside, the backlog of foreclosures and high levels of negative equity, combined with elevated unemployment, pose risks of a double dip in housing; the continued deterioration in commercial real estate poses risks for smaller banks; and financing conditions remain tight, especially for smaller firms reliant on bank finance.”
The report also airs concerns over how the austerity measures in Europe may impact the U.S. economy, “… tipping the balance of risks to the downside, sovereign strains in Europe have become an increasing concern, potentially impacting the United States through financial market and, in a tail risk scenario, trade links.”
All in all, the International Monetary Fund sees the need for the United States federal government to cut spending and raise taxes to address it’s sovereign debt problems. With lower expectations for GDP growth than that of the Obama Administration, the IMF does not believe we can merely spend our way into a sustained recovery. The International Monetary Fund even suggest a national sales tax, or value-added tax, a VAT, to increase revenues to reduce budget deficits.
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