IMF Warns "Big and Beautiful" Bill Will Increase U.S. Fiscal Deficit
On July 3, local time, International Monetary Fund (IMF) spokesperson Julie Kozack stated that the "Big and Beautiful" tax reform bill being advanced by the United States will further expand the U.S. fiscal deficit, contrary to the IMF's consistent recommendation for medium-term deficit reduction goals.
Content and Background of the "Big and Beautiful" Bill
The so-called "Big and Beautiful" bill is a tax reform and spending reduction plan strongly advocated by U.S. President Trump in his second term, named for his frequent description of it as "vast and beautiful." The bill plans to cut taxes by $4 trillion over the next decade and reduce spending by at least $1.5 trillion, aiming to continue and upgrade the tax cut policies from Trump's first term while cutting welfare and "Green New Deal" expenditures from the Biden administration era.
On July 3, local time, the U.S. House of Representatives voted to pass the bill, which will next be sent to the White House for Trump's signature to become law.
IMF Calls for Early Fiscal Rectification in the U.S.
At the press conference that day, Kozack remarked, "The U.S. urgently needs to initiate fiscal rectification; the sooner it starts, the smoother the future deficit reduction will be." She emphasized that the U.S. needs to gradually reduce its fiscal deficit to return the public debt-to-GDP ratio to a clearly declining path.
Kozack noted that America has various policy paths available to reduce deficits and debts, the key being whether the U.S. can reach a consensus domestically on addressing long-term fiscal deficits.
Discrepancies Between IMF and U.S. Fiscal Policies
In recent years, the IMF has suggested that the U.S. increase taxes, including on middle-income earners, to fill fiscal gaps. However, the "Big and Beautiful" bill not only continues the tax cut policies from Trump's term but further increases new tax cuts, which is contrary to the IMF's suggested direction.
The IMF believes that the continued expansion of the U.S. deficit will increase debt burdens, raise long-term financing costs, and may negatively impact economic and financial stability.
IMF to Release Related Economic Impact Analysis
Kozack revealed that the IMF is reviewing the specific content of the "Big and Beautiful" bill and its potential impact on the U.S. and global economies. This analysis will be included in the new edition of "World Economic Outlook" to be released in late July.
