IMF gives US cautious thumbs-up / The IMF is as worried as anyone about US budget deficits

The International Monetary Fund has given its blessing to continued rock-bottom interest rates in the US, saying the Federal Reserve still has time before it needs to making money more expensive.

Strong consumer spending, the IMF says, should combine with business investment to keep the recovery ticking over - albeit nowhere near the 5.6% quarterly growth rate registered between January and March.

But it has also cautioned that US spending needs to fall and tax receipts rise to minimise the risk of severe damage to the economy as the US dollar weakens.

The outlook for the US budget, it warns, "has deteriorated markedly over the past year" as a result of the slowdown, massive tax cuts and a huge increase in federal spending since 11 September.

The IMF's mixed message came a day before the Federal Open Markets Committee meets to decide what should happen to interest rates, becalmed at a 40-year low of 1.75% since December.

With the latest figures released last week - published after the IMF finished compiling its report - consumer confidence and retail sales both weakening, the FOMC will be unwilling to put barriers before business and personal spending by making borrowing more expensive.

The Federal Reserve, it said, "has some room to wait until the recovery is more clearly established before acting, given the minimal signs of impending inflation pressures and the still uncertain economic outlook".

But "important uncertainties remain", it warned - not only in consumer and business spending, but more importantly in the US's huge current account deficit, the measure of how much money from outside a country needs to keep its economy functioning. <>

In the case of the US, that amounts to trillions of dollars a year, and - according to the IMF - requires an encouragement to save, as well as a trimming of public spending.

The original forecast of a 2.5% surplus this year - following the Clinton administration's success in balancing the budget - is long gone, leaving the likelihood of a 1% deficit which could well prove very difficult to reverse.

Finding the cuts elsewhere to feed the massive hike in defence spending will be "difficult to sustain", the IMF said.

EU Tax Commissars Target U.S.

In our recent on-scene report from the UN’s taxation summit in Mexico (see "March Madness in Monterrey" in our April 22nd issue), we warned that UN global tax proponents are pursuing back-door strategies, trying to commit the U.S. in principle to international taxes. European Commission official Frits Bolkestein visited Washington in early June, attempting to induce the U.S. to join the EU’s "Savings Tax Directive," described by financial analyst Veronique de Rugy as the EU’s "proposed savings-tax cartel."

The directive "is designed to stop money from escaping Europe’s high-tax economies and fleeing to low-tax economies," writes Rugy, who studies fiscal policy on behalf of the Washington-based Cato Institute. "And since the United States is a low-tax country (compared to places like France), the plan would require U.S. financial institutions to collect private financial data on non-resident investors so it can be turned over to foreign tax collectors. This is an assault on American sovereignty and it should be rejected."

Though our ever-expanding central government devours nearly 30 percent of our Gross Domestic Product, America remains "the best tax haven in the world," Rugy points out. "Low taxes and a strong commitment to financial privacy combine to attract more than $9 trillion in foreign capital to the U.S. economy. This inflow of money is a key determinant of American prosperity because this money is put to work for the nation and produces more jobs, higher standards of living, and general prosperity."

Extortionate tax rates in the socialist European Union have driven many productive Europeans to invest in the U.S., and "high-tax nations resent this competition, which is why they are lobbying the U.S. government to support the ‘Savings Tax Directive.’" But just as important is the effort to lure the United States into multilateral "tax cooperation" schemes of any sort — all of which would offer precedents toward imposing direct taxes by the UN.

When even the historically Keynsian-socialist IMF thinks the U.S. federal government is speniding too much(1!),

Congress,

the GOP

and the Administration had better wake up,

(WAKE UP!!)

however belatedly!

(The Daschole-Gephardt-Marxist-Crats are simply nearly-war-criminals and many are simply beyond hope and redemption,

are NOT patriots, but are near traitors,

and are primarily interested in short-term political gain at the expense of the economy and the Country

---- and PERMANENT political power.)

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