IMF To Bush: Destroy Your Economy

Oh, that's not quite what they said, but I'm growing too cynical to believe that they don't know the likely outcome of the fiscal policy recommendations they foisted on the Bush Administration yesterday:

While billions of federal dollars are being spent to recover from Hurricane Katrina, the Bush Administration wants the world to know that it will be able to keep its pledge to cut the federal budget deficit in half by the time the President leaves office.

However, the International Monetary Fund is deriding that goal as "relatively unambitious" and suggesting that a better target would be to totally eliminate the deficit by 2010 with the help of tax increases.

"Help". Heh.

They're trying to "help" alright - but not President Bush or the U.S. economy:

The IMF outlook was being released in advance of talks being led by Treasury Secretary John Snow and Federal Reserve Chairman Alan Greenspan with their colleagues in the Group of Seven industrial nations on Friday and broader discussions during the annual meetings of the 184-nation IMF and its sister lending institution, the World Bank, on Saturday and Sunday.

Makes perfect sense, doesn't it? Embarrass and try to undermine Snow and the Maestro before they ever open their mouths and throw them, and the White House, on the economic policy defensive.

The IMF isn't particular about how our taxes get raised. They suggested eliminating some current tax deductions, creating a national consumption tax or a new energy tax (to go on top of the federal income tax). Meanwhile they are aghast at the other means of reducing our budget deficit:

The IMF criticized the Bush Administration's goal of cutting the budget deficit in half by 2009 for not going far enough and also for relying too much on what would be unprecedented cuts in government spending that left the entire program "subject to considerable risk."

"The entire program" presumably referring to U.S. subsidizing of foreign aid through the IMF and the World Bank. The latter of which is set to forgive $40 billion of other countries' debt, even while they're demanding that we tax ourselves to death to eliminate our own.

Amazingly, there are some Republican senators who are siding with them:

But the worst news is that a handful of GOP Senators think a tax increase is needed to pay for Katrina spending. Their immediate target is the 15% rate on capital gains and dividends that was a crucial part of the wildly successful 2003 tax cuts. Those rates are set to expire in 2008, which would mean a big tax increase back to a 35% rate on dividends, and 20% on capital gains.

To prevent such a tax hike, Republicans have included a two-year extension on the 15% rates, to 2010, in this year's budget reconciliation bill. Under Congress's arcane budget rules, this means the extensions can pass with 50 Senate votes, instead of 60. Before Katrina, they were all set to pass.

But now some GOP Senators are suggesting that they should redo reconciliation and drop the capital gains and dividend tax cuts. We're told Ohio's George Voinovich, New Hampshire's Judd Gregg and Maine's Olympia Snowe are three of the troublemakers. As ominously, Majority Leader Bill Frist's chief budget aide, Bill Hoagland, has floated the idea on the record in this newspaper [the WSJ].

Fortunately Finance Committee Chairman Charles Grassley is saying no to the tax-hiking turncoats, and Bush is ready (supposedly) with his veto pen if such foolishness ever reached his desk. But as the Journal points out, there's another number Fristy needs to pay attention to:

$262 billion. That's the amount of additional revenue that the federal government will collect in the fiscal year that ends this month, a roughly 15% increase. This is the largest annual increase in federal revenues, even after inflation, in American history. And it had reduced this year's federal budget deficit - before Katrina - by more than $100 billion, to about 2.7% of GDP, or close to the modern average.

One large reason for this revenue boom is the lower tax rates on capital and income. Since they passed in 2003, the economy has grown at an average rate of roughly 4%, the stock market has recovered most of what it lost when the tech and dot-com bubbles burst, and some four million more Americans are working and paying taxes. All of this has helped fill federal coffers and will also help offset the cost of Katrina.

Obviously the IMF is buying into the myth of George Bush's post-Katrina "irrelevance" - with American taxpayer money, I might add. Of which there'd be a lot less if the President followed their addle-minded advice.

But I suppose they wouldn't mind increasing our deficits as long as they kept getting their ever-growing influx of boodle. Heck, eventually we might become a client instead of a creditor.

An awfully futile approach to rainmaking if you ask me.