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U.S. urged to curb deficit

WASHINGTON — The International Monetary Fund is calling for the United States to make a stronger effort to curb its budget deficits.

The IMF said Thursday in addition to cutting government spending, the Obama administration will have to consider raising taxes to get the U.S. deficit to a manageable level.

The IMF proposed a range of possible tax increases that would be certain to generate huge political opposition, from reducing the popular tax deduction for home mortgages to instituting a national sales tax.

Among the threats, the IMF said, were the possibility of a double-dip recession in housing, continued deterioration in commercial real estate and the threats posed to the U.S. economy from the European debt crisis.

But the IMF said so far the U.S. rebound "has proved stronger than we had earlier expected" thanks in large part to what it called a "powerful and effective policy response" on the part of the government.

But the 185-nation international lending agency was less positive about the outlook for the U.S. government deficits going forward.

It noted that because of the recession and the government's spending to battle the downturn, the amount of U.S. government debt held by the public has almost doubled since 2007 and now stands at 64 percent of the economy as measured by the gross domestic product, the highest level since 1950.

Reacting to the report, a U.S. official said the IMF had used forecasts for economic growth and interest rates that were too pessimistic compared to the consensus of most private forecasters and this had the impact of inflating the government's deficit problem over the next decade.

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