OECD URGES ACTION TO CUT U.S. BUDGET DEFICIT
  The United States should take urgent
  action to cut its crippling budget deficit, including possible
  reductions in non-defense spending, higher taxes and curbs on
  growth of the defense budget, the Organization for Economic
  Cooperation and Development said.
      The OECD, in its semi-annual review of the world economy,
  said a failure of the Reagan Administration and Congress
  quickly to agree on measures to cut the deficit "could seriously
  affect confidence, both in the United States and elsewhere."
      It predicted that the federal deficit in fiscal 1987,
  running until September 30 this year, would substantially
  overshoot both the Balanced Budget Act's target of 144 billion
  dlrs and official U.S. Estimates in February of 175 billion.
      "The OECD projection, which is based on assumptions of
  slower growth, higher interest rates and actual data for the
  first half of the financial year, is for a deficit of about 190
  billion dollars," it said.
      While this would be 30 billion lower than last year's
  deficit, much of the improvement would be due to corporate tax
  increases being introduced before income tax cuts take effect.
      The U.S. Economic growth rate is expected to edge up to
  2.75 pct next year from 2.5 pct this year and last.
      In contrast to the last two years, more competitive exports
  boosted by the fall in the dollar should help GNP growth.
      Unemployment should continue to fall slowly as the service
  sector continues to create jobs. But inflation appears to be
  heading higher, partly due to the lower dollar, with consumer
  prices forecast to rise four pct this year and 4.5 pct next
  year after just 2.1 pct in 1986.
      "Monetary and fiscal policy appear to be the key factors
  behind the avoidance of recession," the report said.
      The current account balance of payments deficit is expected
  to be still around a high 125 billion dlrs next year, after
  hitting a projected record 147.25 billion this year, it said.
      In Canada economic growth is expected to pick up slightly
  to around 2.75 pct in 1988 from 2.5 pct this year, but will
  still be below levels seen in recent years. Inflation is
  expected to slow to 3.5 pct next year from 3.75 pct this year,
  unemployment should edge down to nine pct in 1988 from 9.25 pct
  this year.
      Canada's current account deficit is projected to shrink to
  around four billion U.S. Dlrs this year and to remain at about
  that level in 1988.
  

