U.S. urged to consider higher taxes

November 24, 1992|By New York Times News Service

WASHINGTON -- Exasperated with the failure of the United States to reduce its budget deficit, an organization representing 24 industrial nations said yesterday that the American government must consider increasing taxes. It suggested a 25-cent-a-gallon increase in the tax on gasoline and a 5 percent national sales tax.

The report, issued by the Organization for Economic Cooperation and Development, said the federal deficit of nearly $300 billion threatened to push up interest rates around the world as well as undermine the American government's plans to increase investment.

"Solutions to the U.S. budget situation are readily found," the organization said, adopting an almost scolding tone. "What is required is the will to implement them."

Without referring specifically to President-elect Bill Clinton or any of his plans, the organization said the government should not increase deficit spending to lift the sagging economy, even though it expects economic growth to pick up only modestly next year.

Mr. Clinton's advisers say they do not rule out using increased deficit spending to spur the economy if it remains weak in January. They believe it might be more important to concentrate on accelerating growth before reducing the deficit.

But in its annual review of the U.S. economy, the organization said, "There is no scope for any fiscal stimulus without compromising all pretense of controlling the federal budget deficit in the near future."

The report said that federal, state and local taxes in the United States represented a lower share of gross domestic product than in any of the 23 other industrial nations except Turkey. The U.S. budget deficit is the largest in absolute terms and one of the largest as a percentage of gross domestic product.

The OECD is a Paris-based group of 24 wealthy nations, including the United States, Japan and most Western European nations.

Richard Myers, a Treasury Department spokesman, said that the economy was starting to turn around and that the Bush administration had made every effort to block legislation that would have ill effects on the deficit. Administration officials told the OECD that they had ruled out new taxes and were trying to reduce the deficit through spending cuts.

The report forecast that the U.S. economy would grow by a modest 2.3 percent next year, up slightly from the 2 percent expected for this year and hardly enough to cut unemployment.

The jobless rate, the report projected, would be 7.5 percent at the end of next year, up from 7.4 percent at present, as greater optimism causes many more people to begin looking for jobs.

The report said the budget deficit was a major factor behind the slow growth in living standards in the United States.

It asserted that the government used far too much money for current consumption, like Medicare, that would be better used in investments to build a more productive, more efficient nation.

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