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$47 TRILLION SHORTFALL PREDICTED
Editor's Note: The federal government has lurched into deficit spending like a drunken sailor. It should be the key issue of government and voters in this political year. BW
By Joseph Rebello, Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--Economists at the International Monetary
Fund on Wednesday expressed alarm at growing
U.S. budget deficits, saying continued deficits could hurt the global
economy by roiling currency markets and driving up interest rates.
In a report on U.S. budget outlook, IMF
researchers described the state of
government finances as "perilous" in the
long run and urged Congress and the White
House to take steps to quickly rein in the
deficits.
Although federal tax cuts and
spending increases since 2001 bolstered
the global economy in the short run, the
report said "large U.S. fiscal deficits also
pose significant risks for the rest of the
world."
A key risk is that the recent slide of the
U.S. dollar against other major currencies
could become "disorderly," the researchers
said.
The dollar has declined sharply since
early 2002 against both the European
common currency and the Japanese yen,
complicating the task of European and
Japanese monetary policymakers, said
Charles Collyns, who heads the IMF team
that monitors the U.S. economy.
The White House has said it expects the budget deficit to expand to a
record $ 475 billion in fiscal 2004, exceeding 4% of the gross domestic
product.
U.S. Treasury Secretary John Snow on Wednesday described
that level as "entirely manageable," and said the Bush administration
expects the deficit to shrink to 2% of GDP within five
years.
But the IMF researchers said that won't be enough to address the
government's long-term fiscal problems - including financing the Social
Security and Medicare programs over the next 75
years. In their report, they said the government faces a $47 trillion
shortfall in its ability to pay for those and all other long-term obligations.
Closing that gap would require "an immediate and permanent" federal tax
increase of 60% or a 50% cut in Social Security and Medicare benefits.
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