US risks tepid recovery turning into recession, IMF warns As it stands, the expiration of George W Bush's tax cuts on December 31, and the start of more than $1 trillion in spending cuts in January, mean the US is facing a severe fiscal headwind just as growth is slowing. "It is critical to remove the uncertainty created by the "fiscal cliff" as well as promptly raise the debt ceiling, pursuing a pace of deficit reduction that does not sap the economic recovery," the IMF said in its annual survey of the US. Although pointing to the recent stabilisation of the US housing market, the IMF's outlook for the economy will have done little to cheer President Barack Obama with an election in four months time. Describing the recovery as "tepid," the IMF predicts growth of 2pc this year and 2.25pc next year if, what Federal Reserve chairman Ben Bernanke called the fiscal cliff, is avoided. The report comes amid signs that Europe's recession and an easing of growth in China is beginning to catch up with parts of the US economy after a bright start to the year. The country's manufacturing sector shrank in June for the first time in almost three years, according to a widely-watched survey. The pace of job growth has already been slowing and attention is now focused on the next monthly employment report that will be released on Friday. In an acknowledgement that there is little more that the Fed can do, the IMF urged The White House and Congress to do more to revive the housing market. Homes that have been repossessed should be made available for people to rent, while refinancing of mortgages should be made easier, the report said.