Americans will need to pay much heavier taxes and accept less from public healthcare to put state finances on a sustainable track, according to an IMF study published on Monday.
“The United States is facing an untenable fiscal situation due to the combination of high fiscal deficits, an aging population and rapid growth in government--provided healthcare benefits,” three IMF economists, Nicoletta Batini, Giovanni Callegari and Julia Guerreiro, said in the report.
The economists analyzed the large US public deficit and debt levels and their relation to the demands aging Baby Boomers will place on the government’s Medicare and Medicaid healthcare programs, while the birth rate lags at a record low.
In their report, titled “An Analysis of US Fiscal and Generational Imbalances: Who Will Pay and How?” they said the problem lay in government entitlement programs and especially healthcare — among the most expensive in the world — that face rapidly rising costs in coming years.
Under their “baseline scenario,” Americans need to pay more taxes and the government must cut spending on Baby Boomers — those Americans between about 45 and 65 — and their immediate heirs.
Such steps “would go a long way in returning the United States to a fiscally sustainable path.”
Fully eliminating current deficits and the long-term shortfalls on social plan commitments for the current generation “would require all taxes to go up and all transfers to be cut immediately and permanently by 35 percent,” they said.
“A delay in the adjustment makes it more costly,” they wrote. “Unless currently living Americans pay more in net taxes or unless government spending on current generations is curtailed, future Americans will face net tax rates that are about 21.5 percentage points ... higher than those facing current newborn Americans.”
The study came amid budget tensions between US President Barack Obama’s administration and opposition Republicans over taxes and spending, and as the spiraling US public debt nears its statutory ceiling of about US$14.3 trillion. The Treasury Department said debt totaled US$14.19 trillion as of Feb. 28.
The US is likely to hit its debt limit sooner than thought, the Treasury Department said on Monday, pressuring lawmakers to raise the ceiling or face a possible government default.
“The Treasury Department now projects that the debt limit will be reached no later than May 16, 2011,” the Treasury said.
The department previously estimated it would hit the ceiling by May 31.
If it is not raised, the US would only have weeks before it runs out of cash to pay its bills, according to government estimates.
“Increasing the limit is necessary to allow the United States to meet obligations that have been previously authorized and appropriated by Congress,” US Treasury Secretary Timothy Geithner said in a letter to lawmakers.
He warned that military pay, social assistance payments and tax refunds could be among the first things to be blocked.
“Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover,” Geithner said.
WASHINGTON’S INCENTIVES: The CHIPS Act set aside US$39 billion in direct grants to persuade the world’s top semiconductor companies to make chips on US soil The US plans to award more than US$6 billion to Samsung Electronics Co, helping the chipmaker expand beyond a project in Texas it has already announced, people familiar with the matter said. The money from the 2022 CHIPS and Science Act would be one of several major awards that the US Department of Commerce is expected to announce in the coming weeks, including a grant of more than US$5 billion to Samsung’s rival, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), people familiar with the plans said. The people spoke on condition of anonymity in advance of the official announcements. The federal funding for
HIGH DEMAND: The firm has strong capabilities of providing key components including liquid cooling technology needed for AI servers, chairman Young Liu said Hon Hai Precision Industry Co (鴻海精密) yesterday revised its revenue outlook for this year to “significant” growth from a “neutral” view forecast five months ago, due to strong demand for artificial intelligence (AI) servers from cloud service providers. Hon Hai, a major assembler of iPhones that is also known as Foxconn, expects AI server revenues to soar more than 40 percent annually this year, chairman Young Liu (劉揚偉) told investors. The robust growth would uplift revenue contribution from AI servers to 40 percent of the company’s overall server revenue this year, from 30 percent last year, Liu said. In the three-year period
LONG HAUL: Largan Energy Materials’ TNO-based lithium-ion batteries are expected to charge in five minutes and last about 20 years, far surpassing conventional technology Largan Precision Co (大立光) has formed a joint venture with the Industrial Technology Research Institute (ITRI, 工研院) to produce fast-charging, long-life lithium-ion batteries for electric vehicles, mobile electronics and electric storage units, the camera lens supplier for Apple Inc’s iPhones said yesterday. Largan Energy Materials Co (萬溢能源材料), established in January, is developing high-energy, fast-charging, long-life lithium-ion batteries using titanium niobium oxide (TNO) anodes, it said. TNO-based batteries can be fully charged in five minutes and have a lifespan of 20 years, a major advantage over the two to four hours of charging time needed for conventional graphite-anode-based batteries, Largan said in a
Taiwan is one of the first countries to benefit from the artificial intelligence (AI) boom, but because that is largely down to a single company it also represents a risk, former Google Taiwan managing director Chien Lee-feng (簡立峰) said at an AI forum in Taipei yesterday. Speaking at the forum on how generative AI can generate possibilities for all walks of life, Chien said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) — currently among the world’s 10 most-valuable companies due to continued optimism about AI — ensures Taiwan is one of the economies to benefit most from AI. “This is because AI is