December 9th, 2012
09:00 AM ET
2 years ago

Lagarde: ‘Zero’ U.S. growth without a deal

Washington (CNN) -– The head of the International Monetary Fund warned that the American economy won’t grow next year without a deal on the fiscal cliff.

Christine Lagarde, the managing director of the IMF, spoke to CNN’s Candy Crowley on “State of the Union” about the consequences of the president and Congress failing to reach a comprehensive deal on the automatic spending cuts and tax hikes that would occur without an agreement before the end of the year.

“If the U.S. economy was to suffer the downside risk of not reaching a comprehensive deal, then growth would be zero,” she said. “It would be much better to actually have a more comprehensive approach and to deal with all the issues.”

U.S. gross domestic product grew at an annual rate of 2.7 percent in the third quarter of 2012, according to the Department of Commerce. Going over the fiscal cliff could jeopardize economic growth and put the United States back into a recession.

“The real threat that we have at the moment is really here with us,” Lagarde said when asked about the biggest threat outside the United States. “That can be addressed.”

A former finance minister of France who has been working to stabilize the European economy since taking office in July, Lagarde pressed for a comprehensive solution in lieu of a temporary one that Congress may negotiate before the end of the year.

“I don't think [a temporary fix] is enough because there is still that degree of uncertainty that fuels doubt that prevents investors, entrepreneurs, households from making decisions, because they don't know what tomorrow will be,” she said. “They know that a fix has been found for today. But there is still work to be done tomorrow and the day after tomorrow.”

Lagarde predicted the immediate aftermath would cause a “lack of confidence; markets, I think, would react very quickly… the stock markets really taking a hit.”

“The truth of the matter is that the best way out of this would be a balanced solution,” she said. “The best way to go forward is to have a balanced approach that takes into account both increasing the revenue, which means, you know, either raising tax or creating new sources of revenue, and cutting spending as well.”

A lawyer who grew up on Capitol Hill, Lagarde said she hoped a “sense of pragmatism will prevail and will bring people to look at a broader picture than, you know, what happens within the Beltway.”


Filed under: Fiscal Cliff
soundoff (103 Responses)
  1. POD

    Yep....DUH.....when I lost my job my family cut spending and my family as a whole had to increase revenue by ANY MEANS NECESSARY. What is so complicated about this?

    December 9, 2012 10:33 am at 10:33 am |
  2. Alex

    The true facts are simple. We need to STOP Obama's out of control spending. Spending over 5 trillion this year alone is outrageous. And liberals blame Bush lol That's a joke.

    December 9, 2012 10:33 am at 10:33 am |
  3. disgustedvet

    Despite giddy comments to the contrary,Obama will be the owner of the economic carnage that follows as he refuses to accept ANY of the GOP's proposals. America ( foolishly ) decided to give him another opportunity to do the job we pay him to do but he mistook it as a mandate to become even more dictatorial and less bipartisan. He will pay the price with his legacy destroyed and the GOP will be seen as a saving grace in up coming elections.

    December 9, 2012 10:33 am at 10:33 am |
  4. Joe Mahma

    .
    .
    Why is growth SO important? Seems to me, it's what's killing us.
    .
    .

    December 9, 2012 10:34 am at 10:34 am |
  5. tdg44

    The economy grew 30 billion last month and the government spent an a additionally 80 billion. How does raising taxes cut the deficit. They already spent pretty much the 90 billion annually, they would get if they raised taxes for the 2%. Math doesn't work.

    December 9, 2012 10:34 am at 10:34 am |
  6. D

    we see how well IMF has done with russia in the 90s, Argentina, Venezuela, Bolivia and Greece
    somebody tell that lady to stuff it

    December 9, 2012 10:34 am at 10:34 am |
  7. Concerned Citizen

    But isn't stopping economic growth exactly what the GOP wants? They can't blame the Obama administration if he actually implements a plan that works!

    December 9, 2012 10:35 am at 10:35 am |
  8. mgrgurich

    It amazes me that the GOP worries about the UN taking over the world when all there work is done in public and we get a vote but have no problem with the IMF and WTO controlling the world economy from behind closed doors

    December 9, 2012 10:35 am at 10:35 am |
  9. Hannigan

    You know lets not make a deal let Bush tax cuts expire. Our economy was great before the cuts and if this happens everyone's taxes go up the 1 percent and the 99 percent. I think that America will survive.

    December 9, 2012 10:35 am at 10:35 am |
  10. tdg44

    The economy grew 30 billion last month and the government spent an a additionally 80 billion. How does raising taxes cut the deficit. They already spent pretty much the 90 billion annually, they would get if they raised taxes for the 2%. Math doesn't work.

    December 9, 2012 10:36 am at 10:36 am |
  11. Art

    The first huge cuts should be in congressional retirement and pay and perks. They are irresponsible for the mess we are in.

    December 9, 2012 10:36 am at 10:36 am |
  12. UtahProf

    To me, it is sad how few people are disturbed by the fact that the politicians and money-changers rule the world and ultimately own them. Freedom? HA, what a joke!

    December 9, 2012 10:36 am at 10:36 am |
  13. John

    First, most Europeans are the last people we should be taking advice from. Look at the European countries such as Greece, Italy and Spain – is that what we want to become? Second look at what happened in the UK. They raised the tax rate on the wealthy by 10% and revenues fell by 5%. I'm sure we wil see a different result if we do the same thing here. I think that the Republicans should give the Democrats everything they want – and then let the Dems live with the horrible result. The Dems will simply spend us into bankruptcy and raise taxes over and over. The only way the Dems can survive is to drive more and more people into government dependency.

    December 9, 2012 10:36 am at 10:36 am |
  14. Joshua Fuchs

    We are all going to be looking back four years from now and wonder why we didn't do things so much differently.

    December 9, 2012 10:38 am at 10:38 am |
  15. LI_Bri

    It's all lies. We're being robbed.

    December 9, 2012 10:38 am at 10:38 am |
  16. Nonsense

    @CanadaOne Re points 5, 7, 8: It's not clear how you leap to these conclusions. As a counterpoint, I'll give you one word: California.

    December 9, 2012 10:39 am at 10:39 am |
  17. Bill

    Again, bring it. We should have taken our medicine 5 years ago; the longer we wait to let natural market forces correct themselves, the more severe the Depression is going to be.

    December 9, 2012 10:39 am at 10:39 am |
  18. Terry

    How is he STILL president!?!?! We should be on path to rescovery ... America is doomed!

    December 9, 2012 10:39 am at 10:39 am |
  19. Barb

    Ms Lagarde was very careful in her suggestions AND she was possitive!
    I am tired reading omments suggesting President Obama caters just to the poor, it is time to finally cut a deal with the Republicans. It is time the very wealthy are taxed a little higher and it is time to get to work instead of hateful bickering

    December 9, 2012 10:40 am at 10:40 am |
  20. Clay

    People often forget the dynamic aspect of long-term economics. Although it appears reasonable to raise revenue and cut spendings for the balance sheet, when long-term deficits reduction becomes our primary short-term goal, rather ironically deficit reduction will not be achieved in the long run, however. Our economy still is in period when job growth should be of prime concern. Doing the arithmetic in a static model of the economy is a job for elementary school students. I would not like to see our economy fettered by European economists who wrecked their own economy in the past four years.

    December 9, 2012 10:40 am at 10:40 am |
  21. Name

    Let it FAIL!!!!!!!!!!!

    December 9, 2012 10:40 am at 10:40 am |
  22. G_Edwards

    "The quickest and most effective way to expand the middle class is to drag people down from the upper class."

    December 9, 2012 10:40 am at 10:40 am |
  23. woodie

    Republican congressmen take notes. Your shenanigans will trigger another recession. So shut up and do your job.

    December 9, 2012 10:41 am at 10:41 am |
  24. GWEdwards

    "The quickest and most effective way to expand the middle class is to drag people down from the upper class."

    December 9, 2012 10:41 am at 10:41 am |
  25. CrimsoninOK

    Im not sure if she is concerned about International economics or just US Economics, she does work for the International Monetary Fund after all.. I truly think people see the Republicans offering revenue, and Obama is not offering cuts and almost all Americans see that as part of the solution.. However, what really showed us Obama's colors is when Boehner came back with the 800 Billion in Revenue, Obama says he needs $1.6Trillion, TWICE the original amount, not offering cuts and NOW wanting control of the debt ceiling? If you voted for Obama, you now ARE the problem. He his rolling towards dictatorship. Does anyone here believe he will NOT try to get a 3rd term WITHOUT modifying the constitution? I feared him before, I am TERRIFIED by him NOW.

    December 9, 2012 10:41 am at 10:41 am |
1 2 3 4 5