The United States could be pushed back into recession if automatic tax hikes
and spending cuts take effect next year as scheduled, a potentially
devastating blow to the world economy, the International Monetary Fund
warned on Tuesday.
In its annual review of the U.S. economy, the fund added its weight to the growing chorus of analysts and others worried that political deadlock might lead the nation into an economic disaster.
Unless Congress and the Obama administration agree on alternatives, a set of tax cuts, most of them dating to the George W. Bush administration, will expire next year. A series of automatic budget cuts would also take effect under a separate law.
The combined drag would equal about 4 percent of the nation’s annual economic output, leaving the economy stuck in neutral and perhaps even contracting.
“Failure to reach an agreement on near-term tax and spending policies would trigger a severe fiscal tightening . . . with negative growth early next year and significant negative repercussions on an already fragile world economy,” the fund reported.
After months in which the IMF has cited Europe’s problems as a chief global risk, Tuesday’s report focused on the quandary facing the world’s largest economy: how to curb a massive run-up in debt without stifling economic growth that the fund already considers “tepid.”
Read more: http://www.washingtonpost.com/business/economy/us-economy-at-risk-imf-report-warns/2012/07/03/gJQAuundKW_story.html
In its annual review of the U.S. economy, the fund added its weight to the growing chorus of analysts and others worried that political deadlock might lead the nation into an economic disaster.
Unless Congress and the Obama administration agree on alternatives, a set of tax cuts, most of them dating to the George W. Bush administration, will expire next year. A series of automatic budget cuts would also take effect under a separate law.
The combined drag would equal about 4 percent of the nation’s annual economic output, leaving the economy stuck in neutral and perhaps even contracting.
“Failure to reach an agreement on near-term tax and spending policies would trigger a severe fiscal tightening . . . with negative growth early next year and significant negative repercussions on an already fragile world economy,” the fund reported.
After months in which the IMF has cited Europe’s problems as a chief global risk, Tuesday’s report focused on the quandary facing the world’s largest economy: how to curb a massive run-up in debt without stifling economic growth that the fund already considers “tepid.”
Read more: http://www.washingtonpost.com/business/economy/us-economy-at-risk-imf-report-warns/2012/07/03/gJQAuundKW_story.html
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