IMF says US tax, spending bill runs counter to deficit-cutting advice

Business Standard

20 hours ago

The massive US tax and spending bill slated for a final vote in Congress runs counter to the International Monetary Fund's recommendations that Washington reduce fiscal deficits over the medium term, IMF spokesperson Julie Kozack said on Thursday.
Kozack told a regular news briefing that there was a broad consensus that the Republican bill will add to US fiscal deficits, while the US needs to start a fiscal consolidation.
"From the IMF side, we have been consistent in saying that the US will need to reduce its fiscal deficit over time to put public debt-to-GDP on a decisive downward path," Kozack said.
"Of course, the sooner that process starts to reduce the deficit, the more gradual the deficit reduction can be over time."
Kozack said that there were many policy options for the US to reduce deficits and debt, adding: "It is, of course, important to build consensus within the United States about how it will address its these chronic fiscal deficits." In recent years, the IMF has recommended that the US raise taxes, including on middle income earners, to close fiscal deficits. The Republican tax bill extends 2017 tax cuts and adds new tax breaks for many Americans.
The IMF advice is at odds with the views of US Treasury Secretary Scott Bessent, who has consistently said that he disagrees with traditional budget forecasts and believes that the so-called "One Big Beautiful Bill Act" will spur additional US economic growth that will boost revenues.
The United States is the biggest shareholder of the IMF.
Bessent, who manages the US stake, has criticized the Fund for straying too far from its core economic stability and surveillance missions.
Kozack said that the IMF was examining details of the US legislation and the likely impact on the economy, and will incorporate its analysis into the late July update of its World Economic Outlook global growth forecasts.
The forecasts also will assess the state of play on US tariffs, after President Donald Trump's July 9 deadline to subject many countries to sharply higher duties unless they agree trade deals.