This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

IMF: US Economy Improving But Tax Increases A Drag

By CHRISTOPHER S. RUGABER

WASHINGTON (AP) â¿¿ The U.S. economy is on sounder footing than it was a year ago but is still being restrained by government spending cuts and tax increases, the International Monetary Fund said Friday.

The IMF's annual report on the U.S. economy noted that the underlying fundamentals are gradually improving: Home prices and construction are rising, household finances have strengthened and employers are steadily adding jobs. The outlook was much more optimistic than IMF's 2012 report.

"There are signs that the U.S. recovery is gaining ground and becoming more durable," Christine Lagarde, the IMF's managing director, said in a written statement.

Still, the IMF forecasts economic growth of just 1.9 percent this year, the same as its April forecast. That would be down from 2.2 percent in 2012. And it's below many private economists' expectations that the U.S. economy will grow more than 2 percent this year.

The IMF says the tax increases and spending cuts that kicked in this year will shave about 1.5 percentage points from growth. The international lending organization had opposed the steep federal spending cuts that began on March 1.

The reduction in the U.S. budget deficit "has been excessively rapid and ill-designed," the IMF's report says.

Congress should cancel the $85 billion in spending cuts, the report urged, and replace them with longer-term reductions in entitlement programs, such as Social Security, that would weigh less on the economy.

The IMF also expects the Federal Reserve will maintain its bond purchases through the end of the year and will "very gradually" reduce them next year. The bond purchases are intended to lower long-term interest rates and encourage more borrowing, investing and spending.

Some economists expect the Fed may begin to reduce its purchases as early as its September meeting.

But Lagarde argued that "there is no need to rush," given that unemployment is still high and inflation low.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,390.52 +195.10 1.13%
S&P 500 2,018.05 -2.75 -0.14%
NASDAQ 4,630.7410 +64.6030 1.41%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs