Economy, Spending Cuts | featured news

The International Monetary Fund on Tuesday shaved projections for global economic growth for this year and next to take into account sharp government spending cuts in the United States and the latest struggles of recession-stricken Europe.

The U.S. economy grew at a slightly faster but still anemic rate at the end of last year. However, there is hope that growth accelerated in early 2013 despite higher taxes and cuts in government spending. The Commerce Department says the economy grew at an annual rate of 0.4 percent in the October-December quarter. That was slightly better than the previous estimate of 0.1 percent growth. The revision reflected stronger business investment and export sales.

The wrangling of President Barack Obama and congressional Republicans over the federal budget underscores a clash of core philosophies about how the economy works that supersedes any skirmish on taxes or spending cuts.

U.S. employers ramped up hiring in February, adding 236,000 jobs and pushing the unemployment rate down to 7.7 percent from 7.9 percent in January. Stronger hiring shows businesses are confident about the economy, despite higher taxes and government spending cuts.

A private survey shows U.S. businesses added a solid number of jobs in February, indicating higher taxes and looming government spending cuts have yet to slow hiring.

Tens of thousands of anti-austerity demonstrators took to the streets of Athens on Wednesday as unions staged a general strike to protest government spending cuts and tax hikes, which some predict will push unemployment to an alarming 30 percent. Police said up to 40,000 people were participating in two separate marches in central Athens that were so far peaceful.

"Here's the dilemma: we do have a long-term debt problem, but that doesn't mean that austerity now is the right response," Clinton said, adding that Republicans only support austerity measures "when Democrats are president." An affirmative plan on how to spark job creation and growth is a more powerful argument to the public than the GOP's advocacy for spending cuts and downsizing government, he contended.

A last-ditch tax deal in the Senate might let the U.S. economy will escape the worst of the so-called fiscal cliff and avoid going back into recession. But even if the House goes along, the tax increases likely coming in 2013 will dent economic growth anyway. In the early hours of the new year, the Senate voted to end a long stalemate and raise taxes on upper-income households, extend long-term unemployment benefits and postpone decisions over government spending cuts, officials said. But any deal needs approval from the House.

Financial markets would be affected adversely if U.S. lawmakers fail to agree on a "fiscal cliff" deal before Tuesday, President Barack Obama said in an interview broadcast on Sunday, while urging Congress to act quickly to extend tax cuts for middle-class Americans.

Senate leaders groped for a last-minute compromise Saturday to avoid middle-class tax increases and possibly prevent deep spending cuts at the dawn of the new year as President Barack Obama warned that failure could mean a "self-inflicted wound to the economy."