WARNING FROM THE IMF – AT 9:37 A.M. ET:  As if we need any coaching, the International Monetary Fund is warning the United States about its financial future. 

SAO PAULO (Reuters) - The International Monetary Fund cut its forecast for U.S. economic growth on Friday and warned Washington and debt-ridden European countries that they are "playing with fire" unless they take immediate steps to reduce their budget deficits.

The IMF, in its regular assessment of global economic prospects, said that bigger threats to growth had emerged since its previous report in April, citing the euro zone debt crisis and signs of overheating in emerging market economies.

The global lender forecast that U.S. gross domestic product would grow an anemic 2.5 percent this year and 2.7 percent in 2012. In its forecast just two months ago, it had expected 2.8 percent and 2.9 percent growth, respectively.

The outlook elsewhere was mixed. The IMF said it was slightly more optimistic about the euro area's growth prospects this year, but a lack of political leadership in dealing with that crisis and the budget showdown in the United States could create major financial volatility in coming months.

COMMENT:  We are in trouble, and we've got to get out of trouble.  As Victor Davis Hanson has recently written, our economic troubles are the result of conscious decisions, and we can solve them by other conscious decisions.

At the same time, Hanson warned that we must never accept American decline as inevitable, which is what some on the left – possibly including the president – want to accept as part of economic reform.  American decline, which could include a new isolationism and a dangerous cutting of our defenses, will only result in tragedy down the road.

I might add that some on the right may also be tempted to accept American decline as part of an economic package, and indeed there was a whiff of isolationism in Monday night's GOP debate.  The temptation must be resisted at all costs.  We learned our lesson in the 1930s.  Didn't we?

June 17, 2011