IMF: US Must Raise Taxes to Eliminate Fiscal Imbalance

The IMF does not believe that cutting programs alone will be sufficient to solve the U.S. fiscal imbalance.  Tax increases will be necessary:

IMF seeks US tax rises to meet fiscal problems, by Andrew Balls, FT: The International Monetary Fund has said that the Bush administration's plans to halve the US fiscal deficit over four years are too modest and called for tax increases to tackle longer-term fiscal problems. In its annual report on the US economy, the IMF said that even if the administration's target of halving the deficit over four years was achieved, the deficit and government debt would still be too high in the face of the added burden on Social Security and Medicare created as “baby boomers” start to retire. The report, released late on Friday, said the US should consider measures for broadening the tax base for households and businesses, including a federal sales tax or VAT, and higher taxes on energy use. … The IMF has stressed in other recent reports that the US budget deficit and reliance on foreign capital are a big source of risk in the international economy, and could prompt a disorderly decline in the dollar. … It said that budget discipline would be aided by restoring pay-as-you-go (PAYGO) budget rules, used during the 1990s, which required that spending increases or tax cuts be offset elsewhere in the budget…

Katrina is a non-recurring budget item, at least let’s hope so.  It will be used as a reason to eliminate programs with recurring commitments, and perhaps pork and non-recurring items as well, but even then it won’t be enough to solve the problem.  Program cuts alone will not do it.  For those who say that’s incorrect, all I ask is that you put an explicit and politically feasible list of program cuts on the table to back up your claim.