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. CanadaONE


    1. You go over the cliff
    2. Obama introduces legislation to protect the 98%
    3 The GOP refuses or delays
    4. Democrats blame GOP and slam GOP againts the Cliff – they lost women, latinos, blacks and now white men votes
    5. After the slamming... the Cliff turns into a nice down hill road – i.e. a down turn in deficts and a down turn in unemployment
    6. 2014 – GOP loose majoirty in Congress
    7. Democrats can now vote anything in and the USA does well
    8 GOP dead in the water and break up into 3 spliter groups assuring the democrats will be back in the White House for a VERY long time

    NICE PLAN!!!!

    December 9, 2012 09:32 am at 9:32 am |
  2. Gurgyl

    So true.........
    PS: raise tax on that make 250k or more and cut defense and push Energy efficiency, infrastructure, made in USA, strict immigration, healthcare implements etc., you are fine, USA !!!!

    December 9, 2012 09:35 am at 9:35 am |
  3. plain&simple

    Pragmatic behavior does not compute in a lot of minds right now in the republican party. The wingnutts are even looking for ways to oust their speaker! Talk about inmates running the asylum.....America does not care how congress gets to the 218 votes,democrats and republicans can total that amount right now!!! The delay is republicans know their party is toast when they go down that road. Party before country is a teapub motto!!!!

    December 9, 2012 09:46 am at 9:46 am |
  4. HenryMiller

    US economic growth for 2012 will come in at about 2 percent.; US deficit for 2012, $1.3 trillion, will come to about 8.5 percent of the GDP. No doubt going over the "fiscal cliff" will badly hurt the economy, but Obama's insane deficit spending and incessant demands for outrageous increases in taxes are causing far more, ongoing, damage.

    December 9, 2012 09:52 am at 9:52 am |
  5. dave

    The stock markets really taking a hit. Woooooowee. Exactly who would that hurt? Not the majority of Americans who do not own stocks or work in the "markets". The elite? Sure, they can moan over reduced profits.. ppl like Mitt who only pay capital gains tax (as they don't work or produce anything useful or meaningful in America, just live off of inherited wealth that "money managers" and the markets shift around for their personal profit)... so ppl who try and convince us that THEIR financial gain is American's financial future .. those same people may NOT make as much profit as expected. Boo hoo.

    December 9, 2012 10:03 am at 10:03 am |
  6. Bethes Smith

    It has stopped growing for a while now. In anticipation of the coming tax hikes, our economy has gotten stagnant.

    December 9, 2012 10:04 am at 10:04 am |
  7. jonaty

    The truth is seldom available in the liberal media, things are much worse than they will admit due to their bias in favor of Obama.
    Example: last week the media trumpeted that the unemployment rate went down and that 146,000 jobs were created, but didn't explain that 450,000 more workers gave up and left the work force. This has been going on month after month for 4 years. Nearly 8 million fewer workers are in the work force meaning they no longer are contributing payroll taxes to the economy.
    The unemployment rate could go all the way to zero under these circumstances and the economy would crash.

    December 9, 2012 10:05 am at 10:05 am |
  8. dscon

    She says a balanced plan is needed.............
    Hope Obama doesn't go after her.

    December 9, 2012 10:06 am at 10:06 am |
  9. kc_and_fa

    IMF has its own agenda and has a tendency to put on blinders when it comes to anything that "rocks the boat".

    December 9, 2012 10:08 am at 10:08 am |
  10. Ken

    Raising taxes on the rich doesn't solve the problem. We need to get together and cut the spending: entitlements, defense, etc. If you want to see the big mess the federal government will become, take a look at California. We have a one party rule and it's out of control. Business and people are leaving this great place because we only need someone else to pay their fair share. Please define the fair share.

    December 9, 2012 10:08 am at 10:08 am |
  11. vic , nashville ,tn

    Simple world economy is depend on our economy growth

    December 9, 2012 10:09 am at 10:09 am |
  12. trex

    ............The ONLY thing FALLING FASTER than the unemployment rate is...................the gop APPROVAL RATING............

    December 9, 2012 10:11 am at 10:11 am |
  13. Rambo

    Good old fear always works. Why be rational, and try to prove a point? People won't understand anyways.
    They get fear though.

    December 9, 2012 10:11 am at 10:11 am |
  14. Robot Monster

    Things that cause recessions are really dramatic like the Fed raising short-term rates to 18% or a bursting real-estate bubble. President Clinton raised taxes and the economy did just fine.

    December 9, 2012 10:12 am at 10:12 am |
  15. Rina

    HenryMiller – Obama's "insane" deficit spending? No, what is insane is the GOP relying on the old, tired "trickle-down" theory that has proven time and again it DOES NOT WORK! Doing the same old thing over and over and expecting different results is the true definition of the GOP or in other words – INSANITY! Thank God for Obama – finally we get an honorable, decent man to run this country – one without Dick Cheney and Karl Rove – and he will prevail. The election showed that – can't wait until 2014!

    December 9, 2012 10:13 am at 10:13 am |
  16. Dr Bix

    Just who is this rich banker to tell the US what to do? Who runs this country, I didn't vote for her or the IMF.

    December 9, 2012 10:14 am at 10:14 am |
  17. Caroline

    Obama is going to keep raising the bar so that the US goes over the cliff. He gets a huge more amount of taxes and the military $500 bi,,ion cut. With the obamnacare taxes kicking in the US will go belly up, which is great for the fascists Obbama administration. Thwe US goes into it's 2nd American revolution and overthrows the current government.

    December 9, 2012 10:14 am at 10:14 am |
  18. That's just crazy talk

    The economy will stop growing because Bernanke will have to print even more to keep with the fake growth we have. It's not a growth economy people, over 50% of the US GDP is from government deficit spending. All the levers the man behind the green curtain are pulling are not working anymore, Oz is desperate.

    December 9, 2012 10:16 am at 10:16 am |
  19. Mike

    Yes. Great plan. Allow democrats to keep spending without limits. I won't be 50 years from now so you can deal with the sh1t you voted in. This country will be broke and bowing to a foreign country. Great plan. Enjoy.

    December 9, 2012 10:17 am at 10:17 am |
  20. fastball

    In the eyes of the GOP – they'd rather stand on their principles and go down with the sinking ship, than grab a Democratic bucket and start baling.
    Just lets you know where the GOP puts AMERICA on their priority list. At this point, there is no such thing as a bad plan – but having NO PLAN shows the world that the GOP (and unfortunately. America) is still not ready to pull up their big-boy underwear and get with a program. We're arrogant enough to criticize Greece and other countries for their economic messes – but won't get off our moral pedestals to get our own house in order. Frankly, it's embarrassing.

    December 9, 2012 10:18 am at 10:18 am |
  21. Ben Coates

    Here's the problem with jobs. Employers are insane for putting into job qualifications so much software no one has ever heard of.

    It's not the job of colleges to be career preparation vehicles. They prepare citizens. People who know our culture and history and people who can think critically, and communicate orally and in writing. And impart knowledge. But software has nothing to do with this. Employers want to turn us all into computer science majors and that's because technology has infiltrated every industry and job function.

    December 9, 2012 10:18 am at 10:18 am |
  22. Barry's Brother

    The plan is that Barry will allow the US to fail. In fact, he's encouraging it. The GOP is right in there with him – they both play for the same team. They want to see the US fail in order to move toward global government. The sooner you people see that, the better you'll be able to plan for your downfall. It's going to happen – no doubt about it.

    December 9, 2012 10:19 am at 10:19 am |
  23. whataload

    Way to keep the lib sheep in line! News flash – the economy is STAGNANT, has been STAGNANT, and will get WORSE Regardless of Obamas willingess to throw us over the cliff.

    December 9, 2012 10:19 am at 10:19 am |
  24. rodney

    obama is the reason we are in trouble.he spends money like nothing.

    December 9, 2012 10:22 am at 10:22 am |
  25. fmazzur

    Party politics over the well being of the country. Both sides should just go to hell.

    December 9, 2012 10:23 am at 10:23 am |
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