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Wealth inequality in US highest among advanced economies; progressive tax system required: Gita Gopinath

PTI     January 22, 2020

IMF's Gita Gopinath on Tuesday said the wealth inequality in the US was one of the highest among advanced economies and the country's tax system needs to be more progressive.

As President Donald Trump and his administration touted the bounce back of the US economy, Gopinath also said America should do more to shore up its fiscal toolbox in the event of a more dramatic global slowdown.

Speaking at a session at the WEF summit here alongside Gopinath, US Treasury Secretary Steven Mnuchin said the US economy has been outperforming the rest of the world.

The strong economic growth has created millions of new jobs and increase in wages, all a result of the Trump administration's tax cuts, deregulation policies and trade deals, he added.

The treasury secretary also said the global slowdown was not created by US trade disputes and the economy was slowing before those issues erupted.

Gopinath acknowledged the relative staying power of the US economy, but sounded a note of caution on inequality.

The IMF chief economist said this was primarily due to unequal access to education and healthcare across the country.

"I would also say the US tax system could be somewhat more progressive...it's not right for the times," she added.

On the topic of deregulation, Mnuchin said: "We believe in proper regulation, we just don't believe in over regulation."

He added the US would like to do more work on rebuilding infrastructure. "Energy, pipelines and infrastructure are big areas where will continue to work on deregulation."

Regarding US deficit, Mnuchin said the Trump tax cuts will "pay for themselves. But, there's no question over next few years we are going to have to be careful in slowing down the rate in growth of public spending."

On the biggest risks to the US economic expansion, Gopinath named geopolitical and social unrest, which could be a trigger for for economic volatility.

Mnuchin said domestic political risk is the biggest threat to the US economy.

"There are two very different visions for the way the economy will be managed," he said, referencing the election process underway in the US.

Also read: WEF 2020: India Inc. urges reforms, rallying together to overcome economic gloom

Also read: WEF 2020: Nothing has been done to save the planet, says climate campaigner Greta Thunberg


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