IMF: U.S. Budget Deficits Threaten World
Wed Apr 14, 3:25 PM ET Add Business - AP to My Yahoo!
By MARTIN CRUTSINGER, AP Economics Writer
WASHINGTON - Uncontrolled U.S. budget deficits would pose a serious
threat to global prosperity in coming years as rising interest rates
depress economic growth in the United States and around the world, the
International Monetary Fund (news - web sites) warned Wednesday.
The IMF released a new analysis that predicted if nothing is done to
get control of the soaring U.S. deficits, it would shave global
economic output by 4.2 percent by 2020 and reduce U.S. economic growth
by 3.7 percent during the same period.
IMF economists said much of the adverse impact would occur because of
increased borrowing demands in the United States to finance the budget
deficit. This would drive up U.S. interest rates and interest rates in
other countries as the global supply of available capital is reduced,
they said.
"The rest of the world is affected seriously by the U.S. fiscal
deficit," IMF chief economist Raghuram Rajan told reporters in a
briefing on the new report.
The IMF's forecast that the U.S. budget deficit will be a significant
drag on growth reflected what will occur if there is no improvement in
the deficit, which the Bush administration projects will hit $521
billion this year, a record in dollar terms, and show little
improvement in coming years.
President Bush (news - web sites) submitted a budget to Congress this
year which projects that he will be able to cut the deficit in half
over the next five years, reducing it to a shortfall of $237 billion
in 2009.
The IMF said that if Bush is able to accomplish that such a reduction
in the budget deficit, it would significantly lower, but not eliminate
the adverse effects from the deficit on the U.S. and global economies.
It saw a long-run impact from such a budget reduction as reducing
global economic output by 2.55 percent, compared to a reduction of 4.2
percent under the worst-case scenario in which the deficit remains at
the current record levels.
Under the Bush program to reduce the deficit, U.S. economic growth
will be depressed by 1.88 percent in the long-term, compared to 3.68
percent under the more adverse deficit path.
However, the IMF said that if the United States decided to pursue more
rapid deficit reduction, the adverse drag on growth would be greatly
reduced to just 1.03 percent in the long-term in the United States and
1.47 percent worldwide.
"It would be good if there were stronger measures put in place to
contain the deficit and that is what we are looking for," Rajan told
reporters.
The IMF analysis of the economic impact of the U.S. budget deficits
represented the latest in a series of reports in which the 184-nation
international lending agency has urged stronger measures to get
control of the deficit.
The IMF report conceded that the U.S. deficit, which reflected in part
the impact of President Bush's tax cuts, was useful in helping the
United States and the global economy recover from the adverse effects
of a number of shocks such as the 2001 recession, the terrorist
attacks and the bursting of the stock market bubble.
While interest rates have yet to show significant increases in spite
of the large budget deficits, the IMF said it was only a matter of
time before rates did start to rise, reflecting an improving economy,
increased demand for credit by businesses and actions by the Federal
Reserve (news - web sites) to start raising interest rates to keep
inflation under control.
The IMF said it was important to make as much progress as possible to
get the deficit under control now, before rising interest rates
greatly increase the cost of servicing government debt.
It also warned that the huge U.S. budget deficit could have other
adverse impacts on the U.S. economy such as helping increase the
country's foreign trade deficit and putting downward pressure on the
U.S. dollar.
The IMF analysis of the U.S. budget deficit was contained in the
analytical chapters of its World Economic Outlook, which will be
released in full next week in advance of the spring meetings of the
IMF and the World Bank (news - web sites).
The United States is likely to face criticism at those meetings from
other countries about the need to reduce its budget deficit and trade
deficit in order to lower risks to the global economy.
___
On the Net:
International Monetary Fund: http://www.imf.org
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| User: "Saint Isidore of Laytonville" |
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| Title: Re: US budget deficits threaten world |
20 Apr 2004 11:12:35 AM |
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Send your contributions - anything at all
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Saint Isidore of Laytonville
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AOXOMOXOA and ENESSA QUA ONNICA
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| User: "Saint Isidore of Laytonville" |
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| Title: Re: US budget deficits threaten world |
20 Apr 2004 12:00:11 PM |
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Send your contributions - anything at all
will do: PLEASE --- ANYTHING
FOR YOUR INSTANT KARMA :)
Please send your contributions to:
Charles T. Turley
PO BOX 1767
Laytonville, CA 95454-1767
USA
or send your funds to:
Bank of Willits
145 South Main Street
Willits, CA 95490
USA
Bank routing Number: 121106906
Account Number: 01455796-20
TIA, Blessings & Cheers,
Tom
The Psychedelick Pope
Saint Isidore of Laytonville
^Ö^ Patron Saint of the Internet ^Ö^
°°^Ö^ °°
http://apple2.org.za/gswv/me
AOXOMOXOA and ENESSA QUA ONNICA
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