IMF urges U.S. to cut public debt
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The International Monetary Fund on Thursday urged the U.S. government to cut public debt to ensure sustainable economic growth.
"On the macroeconomic side, the central challenge is to develop a credible fiscal strategy to ensure that public debt is put -- and is seen to be put -- on a sustainable path without putting the recovery in jeopardy," the IMF said in its latest assessment of U.S. economic growth prospects.
According to the IMF, the U.S. public debt has almost doubled since 2007, to a current level of 64 percent of GDP, the highest since 1950.
The report warned that under current policies, U.S. public debt could reach 95 percent of GDP by 2020, and could rise further to over 135 percent of GDP by 2030, considering the impact of the aging population and rising health care costs.
The Obama administration expected the budget deficit to set a new record at 1.5 trillion dollars this year. It vowed to work to halve the budget deficit by 2013, and stabilize public debt at just over 70 percent of GDP by 2015.
The report suggested that the U.S. government should both reduce expenditures and increase revenues. Specific measures suggested in the report include further base broadening via cuts in deductions, particularly for mortgage interest; higher taxes on energy; a national consumption tax; or a financial activities tax.
In the meantime, the IMF stressed that "the timing and composition of the adjustment will need to be carefully designed to minimize the impact on demand while ensuring credibility."
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