US must avoid big tax jump, spending cuts

WASHINGTON – An international lending organization says U.S. lawmakers must work quickly to avoid sharp tax increases and spending cuts that could throw the economy into recession next year.

The International Monetary Fund also says in an annual report on the U.S. economy that Europe's debt crisis could slow U.S. growth. A recession in Europe would lower profits for large U.S. corporations, pushing down their stock prices.

The IMF forecasts the U.S. economy will grow 2 percent this year and 2.3 percent in 2013, roughly in line with forecasts by the Federal Reserve and private economists.

But if Congress doesn't do something to prevent the tax increases and spending cuts early next year, the impact could shave 4 percentage points off U.S. growth and result in a recession, the IMF says.