IMF cuts US growth outlook amid absent policies

The International Monetary Fund cut its forecast for the USA economy Tuesday, saying it could no longer assume the Trump administration will be able to deliver pledged tax cuts and higher infrastructure spending. Although, the president already has said that the broad principles of this plan would be simplifying taxes, rebuilding roads and bridges, and lowering government spending.

"Specifically, it neither builds in the effect of tax reform nor the expenditure reductions proposed in the administration's budget", the International Monetary Fund said, expecting the USA economy to grow 2.1 percent both in 2017 and 2018, down 0.2 and 0.4 percentage points respectively from its previous forecasts in April. But after talks with administration officials amid still-evolving policy plans, the fund says it can no longer factor such fiscal stimulus into its forecasts. "For policy changes to be successful in achieving sustained, higher growth, they would need to raise the US potential growth path".

To address these shortcomings, and given the phase of the economic cycle, the IMF advised the U.S. should gradually remove fiscal and monetary support and focus on raising its potential for growth, increasing competitiveness and strengthening the supply side of the economy.

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Democrats are simply opposed to any Trump initiative whatsoever because the lack of progress on Trump's reforms, they assume, brightens their electoral prospects from 2018 and 2020.

The IMF, after a review of USA economic policy, said the Trump administration was unlikely to achieve its goal of annual GDP growth of 3 percent over a sustained period, partly because the labor market is at a level consistent with full employment.

"The US economic model is not working as well as it could in generating broadly shared income growth", Werner said during a press conference. By 2020, Trump says, his economic planning will push annualised GDP growth above the 3 percent threshold, and this economic prosperity will last for seven more years. "Most critically, relative to historical performance, post-crisis growth has been too low and too unequal".

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The US is having trouble adapting to trends such as changes to the job market from technology, low productivity growth and an ageing population, the International Monetary Fund said, noting that household incomes are stagnating for a large share of the population.

Even while the U.S. is seeing its third longest expansion since 1850 and is at full employment, the world's largest economy is facing rising public debt and an overvalued currency - which tends to hinder exports. Jobs don't help any longer. The Washington-based lender also trimmed its projection for the rate of expansion in the United States for the following year from the 2.5% seen in Spring to 2.1%.

On the other hand, the president has made promises to promote USA economic growth.

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