“In an interview, IMF Managing Director Dominique Strauss-Kahn said a desire to support growth is not inconsistent with the G-20′s deficit-reduction goals. ‘Everyone has to look at fiscal consolidation, but they can do it at a different pace,’ Strauss-Kahn said. ‘It would be a disaster if all the countries were tightening. It would totally destroy the recovery. We need somehow today to go on supporting growth except for those who are really constrained.’
Strauss-Kahn said the specific targets for when and how much to cut deficits are less important than whether countries ‘implement the right measures.’ In a report for the Toronto summit, the IMF encouraged nations to adopt ‘growth-friendly’ policies as they seek to reduce deficits, for example by shifting from income and payroll taxes to consumption taxes. In the United States, that might mean adopting a value-added tax (or VAT) of up to 8 percent on all goods and services.
The idea of a VAT has been broached in Washington — most prominently by Obama economic adviser Paul A. Volcker — but has so far failed to gain political traction. Instead, the debate has focused on reductions in Social Security and health benefits, cuts in Pentagon spending and a freeze for other government programs.”