IMF economists see dire future for US taxpayers

Apr 04, 2011

Americans will need to pay much heavier taxes and accept less from public healthcare to put state finances on a sustainable track, according to an IMF study published Monday.

"The United States is facing an untenable fiscal situation due to the combination of high fiscal deficits, an and rapid growth in government-provided healthcare benefits," three International Monetary Fund economists said in a report.

The economists analyzed the large US public deficit and debt levels and their relation to the demands will place on the government's Medicare and Medicaid healthcare programs, while the birth rate lags at a record low.

In "An Analysis of US Fiscal and Generational Imbalances: Who Will Pay and How?," they said the problem lies in government entitlement programs and especially healthcare -- among the most expensive in the world-- that face rapidly rising costs in coming years.

Under their "baseline scenario," Americans need to pay more taxes and the government must cut spending on Baby Boomers -- those Americans between about 45 and 65 -- and their immediate heirs.

Such steps "would go a long way in returning the United States to a fiscally sustainable path."

Fully eliminating current deficits and the long-term shortfalls on social plan commitments for the current generation "would require all taxes to go up and all transfers to be cut immediately and permanently by 35 percent," they said.

"A delay in the adjustment makes it more costly," they wrote.

"Unless currently living Americans pay more in net taxes or unless on current generations is curtailed, future Americans will face net rates that are about 21.5 percentage points... higher than those facing current newborn Americans."

The study came amid budget tensions between President Barack Obama's administration and opposition Republicans over taxes and spending, and as the spiraling US public debt nears its statutory ceiling of about $14.3 trillion.

The Treasury Department said debt totaled $14.19 trillion as of February 28.

Republicans have said any increase in the debt ceiling must be coupled to deep spending cuts, while denying that they will let Washington default on its obligations and precipitate a likely financial crisis.

The authors of the IMF study were economists Nicoletta Batini, Giovanni Callegari and Julia Guerreiro.

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User comments : 12

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Moebius
2 / 5 (2) Apr 04, 2011
Our out of control and almost totally unnecessary military spending is going to be the death of us, literally and figuratively.

Why is it no one wants to mention how much of our tax burden is for the national debt? How much would our taxes go down if we had zero national debt? Not one politician or commentator has ever addressed this even while talking about lowering our taxes for the last 20 years.
rgwalther
2 / 5 (1) Apr 04, 2011
Or better yet, lets put a gun to the head of each vampire in the IMF and make them all an offer they can't refuse.

The definition of money has to change before the medievalist bankers bring down the world economy.
Money should be defined by a moebius strip...
Doschx
1 / 5 (1) Apr 04, 2011
so... who's going to come and collect on america's debt? who's going to foreclose on the federal government if they cannot pay their debt? It seems to me that america cannot be held accountable because nothing is strong enough to check it. If the nations of the world want their money back, just see what happens when they try to claim it. Same goes for internal debts and money owed to companies and states.

Meh, whatever. If someone could give me a link to similar situations in history where nations overly indebt themselves to others I'd like to read what the outcomes were. Sucks when you realize you have a knowledge gap.

@moebius as far as I have pondered, the single reason for the existance of a nation is to protect constituents against other nations. Fat needs to be trimmed from all other areas before the national defense, and some areas need to be removed completely. I agree with your second point though.
orsr
not rated yet Apr 05, 2011
The demographic trend is uncompromising.
ryggesogn2
1 / 5 (1) Apr 05, 2011
What! The govt spends too much?
COCO
1 / 5 (1) Apr 05, 2011
you better get Ron Paul in charge or move to a country not engaged in endless wars.
Skeptic_Heretic
5 / 5 (1) Apr 05, 2011
Meh, whatever. If someone could give me a link to similar situations in history where nations overly indebt themselves to others I'd like to read what the outcomes were. Sucks when you realize you have a knowledge gap.
Germany post WW1 is such a situation. Germany found itself in an unpayable mass of debt due to the costs of european reparations for losing WW1. In turn they printed off enough money to pay the debts, also sending the value of their currency into the toilet.

A decade of brutal poverty followed by WW2, that's what happens when an industrialized nation does this.

Unindustrialized nations.... take a look at Rwanda, Zaire (gone), Burma (gone), Somalia (gone), etc.
CHollman82
3 / 5 (2) Apr 05, 2011
Meh, whatever. If someone could give me a link to similar situations in history where nations overly indebt themselves to others I'd like to read what the outcomes were. Sucks when you realize you have a knowledge gap.


It happens all the time, they usually disappear... If you think there will be no consequences for our national fiscal irresponsibility you are sorely mistaken. The people will pay, in the form of crippling poverty and depression. Revolution will not be out of the question.

However, we have climbed high, and we have a long way left to fall... but don't think the fall will be enjoyable.
MNIce
5 / 5 (2) Apr 09, 2011
A major factor in the fall of the Roman Empire was the debasement of its money to mask government debt; we are following much the same path to systemic collapse. Raising taxes as the IMF suggests is a losing proposition. The combined tax burden on the productive members of society already retards the economy too much to provide optimum tax revenue. The US already has the world's highest corporate tax rate; that is one reason why so many companies locate manufacturing operations elsewhere.

Military adventurism is not the most significant component of our fiscal mess. Check www.usdebtclock.org to see how much goes to welfare programs and debt service. The federal government is trying to do too many things, and it's doing them badly instead of doing a few things well. We need to find non-federal solutions for welfare and other things not authorized by the US Constitution; a large central bureaucracy for these functions wastes too much money.
JoeBlue
3 / 5 (2) Apr 10, 2011
Meh, whatever. If someone could give me a link to similar situations in history where nations overly indebt themselves to others I'd like to read what the outcomes were. Sucks when you realize you have a knowledge gap.
Germany post WW1 is such a situation. Germany found itself in an unpayable mass of debt due to the costs of european reparations for losing WW1. In turn they printed off enough money to pay the debts, also sending the value of their currency into the toilet.

A decade of brutal poverty followed by WW2, that's what happens when an industrialized nation does this.

Unindustrialized nations.... take a look at Rwanda, Zaire (gone), Burma (gone), Somalia (gone), etc.


You forgot to mention Belgium. They still don't have a standing Government.
Skeptic_Heretic
5 / 5 (1) Apr 10, 2011
The US already has the world's highest corporate tax rate; that is one reason why so many companies locate manufacturing operations elsewhere.
Sorry, that's bullshit. Effective corporate tax rate is between 7 and 12 percent. One of the lowest in the world. Companies go elsewhere because the main expense in manufacturing is labor safety. The US and Europe have stringent safety regulations. The Soviet Union doesn't but if people start dying the government steps in. Most of Asia and South America are the wild west. A bribe and a handshake ensures those malfunctioning safety devices are overlooked, and the bribes are cheap compared to trying to buy a US or European regulator. Only the largest businesses even attempt to shoulder that cost, ie: fossil fuel companies, energy companies, utilities like phone companies, etc.
ryggesogn2
1 / 5 (2) Apr 10, 2011
"with a corporate tax rate of 39.2 percent (when combining state and federal taxes), the United States would find itself taxing businesses more than any of the other nations in the organization. Economists say that high corporate tax rates will do little but drive business and investment out of the United States."
http://dailycalle...-a-year/

Unless, of course, a company is large enough and has the right political connections, then they pay no corporate taxes like GE.

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