December 9th, 2012
09:00 AM ET
10 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. Ray E. (Georgia)

    The IMF get's the Lion's Share of it's money from the U.S. The World get's most of it's money by selling stuff to the U.S. The world is in a Monotary crisis because of the big liberal policies put in place by the Liberal's over the last 75 years. You see the riots in Europe because of Austerity Measures that have to be put in place. The Liberal's and Obama has refused to see the hand writing on the wall and still refuses to make any consesions on Taxes so the world flounders. Maybe the Liberal's will wise up and reralise they are wrong.

    December 9, 2012 11:00 am at 11:00 am |
  2. Name

    All kingdoms has risen and fallen.the filthy rich don't want to pay more taxes to help out the country get back on its feet. That will be there down fall.after that people will take to the streets to protest or riot. Look in the middle east;not to looks like ww3 is about to start.

    December 9, 2012 11:00 am at 11:00 am |
  3. joe mama

    considering as a reality we effectively already have ZERO growth based on Tax and Destroy policies of Carter, Clinton, and C-Obama, there is only one solution: cut taxes and reduce spending WHICH HAS ALWAYS WORKED. The problem is the clowns in office do not want to lose the flow of money into their own pockets so they pander to the people paying them off. This translates into gridlock and stupidity. The only way this country is getting back to where it should be is with a Revolution. Take back Washington. Take back our States. Take back our Country. We have to start fresh with a constitutional ammendment to limit: terms, pay, perks, and anything else they're abusing. This has to end now before we are run over by the Chinese or ANY other country with the means to do so. Could be Outer Southern Bolivia for all I care but at the rate we're going, Washington will surrender to the highest bidder and without a shot being fired (and Bob Costas will shriek with girlish glee).

    December 9, 2012 11:01 am at 11:01 am |
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