IMF urges Trump, Biden to ‘carefully consider’ tax hikes as budget deficit rises to alarming levels

The International Monetary Fund (IMF) has urged the United States to quickly address its growing fiscal burden. Critics of the IMF came before the first presidential debate and targeted the tax plans proposed by the candidates.

What happened:In the IMF’s annual Article IV Health Check projections, the report predicts that the U.S. debt-to-GDP ratio could climb to 140 percent by 2032, a significant increase from 120 .7% current, the Financial Times reported on Friday. This increase, attributed to anticipated budget deficits in coming years, would surpass previous records set after World War II.

The IMF has warned that these rising deficits and debt levels pose a growing threat to the U.S. and global economies. Potential repercussions include higher fiscal financing costs and a risk to the smooth rollover of maturing bonds.

“These chronic budget deficits represent a significant and persistent policy misalignment that urgently needs to be addressed,” the Fund report said.

The IMF has urged both presidential candidates, the incumbent president Joe Biden and former president Donald Trump consider a series of tax increases, particularly on incomes of those earning less than $400,000 a year. The fund also noted that Trump’s tax plans, which include making permanent a series of cuts he introduced in 2017, are expected to add between $4 trillion and $5 trillion to the U.S. deficit over the next decade.

See also: Nasdaq futures rise Wednesday: What’s happening

Why is this important:The IMF warning follows the Congressional Budget Office’s prediction earlier this month that the deficit would hit $1.9 trillion this year, or about 7% of GDP. That forecast has raised concerns among economists and investors that neither Biden nor his Republican rival Trump are prepared to adequately rein in spending.

The IMF has already expressed concerns about the sustainability of U.S. fiscal policies. The fund’s deputy director, Gita Gopinathstressed in an interview that the United States cannot sustain a deficit of 7% of GDP.

Meanwhile, Treasury Secretary Janet Yellen said the current level of U.S. debt is manageable, provided it remains at its current level relative to the economy. However, interest payments on the national debt are expected to exceed $1 trillion this year, nearly double the amount paid before the Fed aggressively raised interest rates.

Read next: Wall Street Wavers, Nvidia Recovers Losses, Tesla Eyes 4-Month High Close, Amazon Hits $2 Trillion Valuation: What’s Driving Markets Wednesday?

Image created with Midjourney AI

This story was generated using Benzinga Neuro and edited by Pooja Rajkumari