IMF urges Washington to cut budget deficit
D.C., Washington, United States (AHN) – The International Monetary Fund urged Washington Thursday to reduce its budget deficit.
The multilateral agency pointed out unless the United States government acts quickly to control government deficits, it could face slower growth and more difficult policy choices in the future.
The warning came a day after the U.S. Congressional Budget Office released its mid-year assessment in which the watchdog forecast a $1.5 trillion budget gap for the current year.
IMF Fiscal Affairs Director Carlo Cottarelli stressed that while the U.S. has a lot of credibility, it could not last forever. Cottarelli chided U.S. leaders for reneging on its promise made to other leading economies to reduce by half its budget deficit by 2013.
In response to the IMF report, White House Press Secretary Robert Gibbs said the ballooning budget deficit was the result of many years of spending by different administrations, and the solution must come from joint efforts of Democrats and Republicans.
While President Barack Obama had called for a freeze on discretionary spending at the State of the Union address this week, the IMF said Washington needs to make more spending cuts on pension and health entitlement programs.
The CBO report led Republicans to seek large and immediate cuts in federal spending. The Republican Study Committee proposed a $2.5 trillion cut in spending over 10 years. Republicans in the Senate said they would pursue again a constitutional amendment mandating balanced national budget.
Democrats rejected the study committee’s proposal because it would result in cutting important programs and unemployment of more than one million workers.
The IMF said the U.S. is not the only world power that failed in reducing its deficit. The agency also cited Japan, which suffered Thursday a downgrade in its bond rating to AA- from AA from ratings agency Standard & Poor.
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