India News and Travel Times Provides India-centric and other News and Features

The International Monetary Fund has warned the United States that its economy could be pushed back into recession if automatic tax hikes and spending cuts take effect next year as scheduled, and would be a potentially devastating blow to the world economy as well. 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. The IMF report claimed that 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, while 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, the report cited. "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 Washington Post quoted the organization as writing, in its report. The fund lowered its estimate of U.S. growth for this year and next, forecasting the economy to expand by 2 percent this year compared with the 2.1 percent growth rate it projected in April, which added to the concerns about the slowing global economy, with several euro-zone countries mired in recession and emerging giants such as China and India cooling from the high rates of growth that had helped buoy the world's outlook.

'Fiscal cliff' of tax hikes, spending cuts putting US economy at grave risk, finds IMF report