December 9th, 2012
09:00 AM ET
1 year 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. Rick McDaniel

    Tell it to the Dems. They still believe in their fairy tale.

    December 9, 2012 10:42 am at 10:42 am |
  2. poopmeister

    I love how the GOP uses the wording of an increase of "revenues" vs. "taxes"....what's the difference, it's money coming out of someone's pocket. Unfortnuately when the economy tanked, it required workers that lost their jobs to depend on welfare services. It's hypocritical to say that the government should stop handing out so much money, Chris, because hardworking people that have no other options have also had to seek welfare. There should definitely be some reform done but as we saw with hurricane Sandy, sometimes funds go to where is needed and the government can do good, even a large government. I use that example, because in the face of disaster is when the whole country looks to the Federal government for help, why can't this be so with all other pressing issues i.e. unemployment recovery. And don't say that they failed in job growth because that is a flat out lie and dangerous propoganda, job growth has been in the plus for quite some time now.

    December 9, 2012 10:42 am at 10:42 am |
  3. Booseyboo

    @ Wire, cut the partisan BS. Unfunded wars are on the heads of both GOP and Dems. Besides the majority of Americans were for the wars until they dragged on too long and we couldn't get our quick, immediate fix.

    There must be tax increases and spending cuts across the board. If we are all not in this to fix it together there will always be more room for one section to outstretch their hand for more. I personally believe that before Congress raises one penny on any individual regardless of income that fraud, waste and abuse of all programs must be addressed but it won't be...Congress just wants more money to spend, period.

    December 9, 2012 10:42 am at 10:42 am |
  4. Joshua Fuchs

    In 4 years we will all be looking back wishing we had chosen the right leadership. This country is going to become more of a socialist state, thanks all you Obama voters, however that's what you guys wanted right? Handouts? Free healthcare?

    December 9, 2012 10:43 am at 10:43 am |
  5. Jim Russo

    Yeah, because we all know that we can trust the IMF.
    /sarcasm

    December 9, 2012 10:43 am at 10:43 am |
  6. HAHA

    Things would be much worse under Mittens.

    December 9, 2012 10:44 am at 10:44 am |
  7. Booseyboo

    Art, I almost agree with you...we the American people who continuously vote them in are to blame as well. This past election, it was reported 90% were re-elected. Congress had an overall low approval rate yet the majority are re-elected. Unsat!!

    December 9, 2012 10:45 am at 10:45 am |
  8. Tommy

    My point is, " Either you believe in the constitution or you are my enemy."
    Also, I do not need your money to survive. Try and come and tax me on my food. Good Luck!

    December 9, 2012 10:47 am at 10:47 am |
  9. Mike

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

    LI_Bri said:
    It's all lies. We're being robbed.

    I say, WERE ALL GONNA DIE!?!

    December 9, 2012 10:47 am at 10:47 am |
  10. Becca

    The hold up is the republicans! Everyone has to give the president a chance. He did not start a war but he is trying to finish it. I do not think he will be so bad but if the republicans keep saying no then maybe we need to clean house in the congress. He does not want to take away social security and it is not welface remember this. We have all paid into social security.and it should be there for us. I paid into it for almost 40 years. So I did my share for sure. It has not gone up and from what I understand it will not. but everything has fone up in price. We are paying more for our mediciine and food and Doctor visits. We need help with this matter and congress does not want us to have our checks every month that we have earned. I do think that money should be taken from congress and they need to see how it would be to live like a lot of us do. So most of you can blame President Obama but you are not blaming the right person at all.

    December 9, 2012 10:47 am at 10:47 am |
  11. cassarit

    Unbelievable!
    Some French lesbian is telling us what we should do with our economy. We should refuse any deal.

    December 9, 2012 10:47 am at 10:47 am |
  12. Gordo

    Frankly, I really don't care one iota whether taxes are raised on the rich or not as the additional revenue is simply too insignificant to really matter.
    The real issue which is being ignored by the media and many posters is the deficit and the debt which is not sustainable over the next 5 years. The current administration is suggesting that their minuscule spending cuts over 10 years will be enough. They won't be.

    December 9, 2012 10:47 am at 10:47 am |
  13. Jacob

    Deal or no deal, United States of America will continue to grow and prosper.

    December 9, 2012 10:48 am at 10:48 am |
  14. jorge washinsen

    If it means we can't ship funds to 60 countries ,from our treasury, that we know not what they are being used for, except buying weapons,then it would probably be a winner instead of a failure.

    December 9, 2012 10:49 am at 10:49 am |
  15. vic , nashville ,tn

    @ Caroline
    Republicans will fund a war stealing from grandpa social and Medicare
    2nd American revolution started in 2010 tea party splitting republicans

    December 9, 2012 10:50 am at 10:50 am |
  16. Sagebrush Shorty

    Lagarde is" a former finance minister of France who has been working to stabilize the European economy since taking office in July"
    Nice job so far with Europe. Stay away from us.

    December 9, 2012 10:51 am at 10:51 am |
  17. AJB

    The U.S. is a closed economy? It trades with itself? Where did this lady get her information? If the U.S. is a closed economy how could we have such huge trade deficits?

    December 9, 2012 10:52 am at 10:52 am |
  18. Pete

    Rick McDaniel on another site said it was Democrates that created depressions,recessions ..Better check out your facts nitwit with Hoover creating the Great Depresion and Roosevelt taking 12 years to fix it and your most recent recession created by Bush 43,remember that or as most of you delushional republicans in denile.We Democrates keep putting the responsible people in office that help this country and you go back and destroy what we've gained,pure ignorence or being basicly treasonistic more likely sounds to me ..Republicans have always put themselves first over their constituents and country,its recorded for all to see and they can't change that dirty fact..Now republicans are in the hot seat and know their futures are in Pres.Obamas hands and they better change their stances or they'll all be out by midterms ,its only fair because since the presidents inaugeration all republicans have done is obstruct and you want everyone to understand after our financial rating was downgraded and almost closing government they want us to forgive,forget yah right when maybe you're all out then will be alright again,republicans as a party are so politically pathedic!!

    December 9, 2012 10:52 am at 10:52 am |
  19. CatSh

    Joe- growth is the basis of investment. People invest, the business grows, and their investment is worth more.
    As a whole, business has to grow because the population is growing. Growth creates jobs.
    I know what you are thinking, though. Private businesses really don't have to grow. As long as the owner is satisfied with the level of profit, there is no need for more.

    December 9, 2012 10:53 am at 10:53 am |
  20. Drew

    Is it so terrible if the economy is just "stable" rather than growing? Can't we learn to use what we have more effectively rather than trying to have more?

    December 9, 2012 10:54 am at 10:54 am |
  21. CatSh

    Joe- growth is the basis of investment. People invest, the business grows, and their investment is worth more.
    As a whole, business has to grow because the population is growing. Growth creates jobs.
    I know what you are thinking, though. Pri-vate businesses really don't have to grow. As long as the owner is sat-isfied with the level of profit, there is no need for more.
    Unfortunately, for most humans, there is never enough. They keep chasing a happiness that can't be bought with more money.

    December 9, 2012 10:55 am at 10:55 am |
  22. Reince Your Priebus Daily

    Adults understand that Democracy requires compromise.

    Republicans.........not so much.

    December 9, 2012 10:55 am at 10:55 am |
  23. melody eskanos

    I say... No break for holiday until a deal is reached! I recall, stayng after school in 8th grade, back in 1902, because I did't finish my homework.I had to write, on the chalk board, 1902 sentences, that stated...' I will turn in my homework on or before the fiscal year cliffed!!
    Now, ladies and gentlemen, in your acute career status, we are all puting you on, 'In Office Suspension', until a deal can be reached. You THOUGHT you got to go have recess....
    Wrong answer. You all stay after school until a decision is reached!! Until the, bread and water for your inaction! Shame on you!
    Every kindergarten teacher knows, the WHOLE CLASS stays after shcool to finish their studies and turn in their homework until finished! Hahahaha...
    Can't contain my laughter of comparison, to the senate and kindercarful!!
    YOU ARE ALL IN TIME-OUT AND OR DETENTION UNTIL THE DECISION IS MADE OR YOU STAY AFTER CLASS AND WILL NOT GO ON HOLIDAY WITHOUT THE PROPER DECISION.
    AND OUR CHILDREN FOLLOWS IN WHOSE FOOTSTEPS? YOU ARE ALL GOOD ROLE MODELS FOR WHICH COUNTRY?
    SHAME ON YOU ALL!!!
    DETENTION, I SAY...
    ONE FOR ALL AND ONE FOR NONE... HMMM, I SMELL REVOLUTION.... CAN YOU SMELL IT?????

    December 9, 2012 10:56 am at 10:56 am |
  24. dave

    Yeah, thanks for stating the obvious, lady!

    December 9, 2012 10:56 am at 10:56 am |
  25. poopmeister

    It's a bunch of crap that the country should worry about accumilating additional debt. Believe it or not, it is the best time for the US to borrow. The rates that the US can get on borrowed money is super low and now is the time to do it, economists actually agree on this but the reality is that the debt is still of concern. We should be going into debt for the right reasons, not wasteful spending but if you actually take a good look at spending....there's not all that much that is wasteful. Funny that the GOP doen't mention defense spending, which seems to have the most wasteful spending of any program. Also, medicare should not be touched, they need to tackle the rise in healthcare costs. The healthcare industry has been bleeding us dry for years

    December 9, 2012 10:57 am at 10:57 am |
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