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. MaryM

    Stop the bs and just do a deal. Both sides

    December 9, 2012 10:23 am at 10:23 am |
  2. Wire Palladin, S.F.

    Continuing low tax rates for those making over $250,000 does not even begin to address our deficit. Right wingnuts have to realize there has to be a combination of revenue increases and spending cuts, in order to pay for the wars and other republican fiscal insanity.

    December 9, 2012 10:24 am at 10:24 am |
  3. brian

    Sure, speak publicly and prematurely scare the markets, like they actually need any help. If somebody says "I saw a ghost" markets fall... and oh yeah, you forgot to mention about the flying monkeys stealing everyone's toilet paper...

    December 9, 2012 10:24 am at 10:24 am |
  4. BlackDynamite

    I don't know which organization is more corrupt, the IMF or the World Bank.

    December 9, 2012 10:24 am at 10:24 am |
  5. David Omi

    This woman gets paid millions to state the obvious

    December 9, 2012 10:25 am at 10:25 am |
  6. Jb

    The ball is in Obama's court.

    December 9, 2012 10:25 am at 10:25 am |
  7. roy

    Simple solution scrap the current tax system in favor of a flat tax system for ALL income and eliminate the Social Security tax cap for high income earners. This would actually help fix our national debt, eliminate political theatre, and force tax revenue on all income plus eliminate loop holes.

    December 9, 2012 10:25 am at 10:25 am |
  8. Kevin M

    @Caroline: take off the tinfoil hat and get an education. Love, Proud Liberal

    December 9, 2012 10:25 am at 10:25 am |
  9. Chris

    Our President is dead set on getting a free hand raise the debt ceiling to whatever he wants it to be. This, along with the way he's been catering to those on welfare, food stamps, public housing, healthcare, etc scares me. You can't have a great economy without everyone of working age WORKING! Quit handing out so much money, quit fighting senseless wars that you can't win, and quit trying to ruin America by becoming a dictator!

    December 9, 2012 10:25 am at 10:25 am |
  10. Blaster34

    Sorry Miss IMF, its going to be Zero Growth for another few yrs, deal or no deal. The options coming forth from obama and Congress will do nothing to get the economy moving, its all punitive.

    December 9, 2012 10:25 am at 10:25 am |
  11. NameJoe

    Ron Paul.

    December 9, 2012 10:26 am at 10:26 am |
  12. Ratherbbobating

    To those who think Obama has a plan, what is it? And what happened to his last budget? It got a total of zero 000 votes in the Senate. Why don't we have a budget, and when was the last time we had one? Ask the Dem and Reed.
    Notice that the liberals and socialist are out this morning in full force, blaming the Rep for all of their problems. What did the Dem do when they had control of House, Senate and Obama in office? Obamacare and its new taxes. He has already raised taxes on people who earn more that 200k.
    We don't have a tax problem, we have a spending problem.

    December 9, 2012 10:26 am at 10:26 am |
  13. ObamaUnitl2016

    And the GOP will be blamed if there is no deal and Boehner knows it.

    December 9, 2012 10:27 am at 10:27 am |
  14. john

    Anyone who thinks it is great for either party to be able to push whatever plans they have through without resistance is as naive as one can get. Most politicians are not seeking what is best for the United States but what is best to get re-elected.

    December 9, 2012 10:27 am at 10:27 am |
  15. Jt_flyer

    I hope all of you have prepared for what's about to happen.

    Te american people will not be extorted by the GOP. We voted! You lost miserably. No deal with the elimination of the GW Bush era tax cuts for the rich. I'm ready. Take us to the cliff. We'll be a better country for it. Obama can't lose as long as he does what we voted him to do.

    December 9, 2012 10:28 am at 10:28 am |
  16. Roses

    Ron Paul was right. One side won't budge on welfare and the other side won't budge on defense AND NEITHER SIDE acknowledges the USA is completely broke. The kicker is that both sides are at each other's throats persistently, and with this continuing behavior , AMERICA WILL NOT ONLY BE BROKE, BUT ALSO BROKEN. Unless intelligence (and not victim hood and emotion) again prevails, kiss America as we once remembered, GOODBYE.

    December 9, 2012 10:28 am at 10:28 am |
  17. olepi

    The GOP doesn't care if the economy goes back into a recession, they didn't care before and they don't care now.

    They only care if they get the blame. If they can crash the economy again, and blame President Obama, then they'll do it without any qualms.

    December 9, 2012 10:28 am at 10:28 am |
  18. Wire Palladin, S.F.

    When Obama took over, the GDP was negative 9.4%. Now it is over positive 2. Quite an improvement without a single vote from a republican. I hope that right wingnuts realize that Fox foreign owned media is not interested in America succeeding.

    December 9, 2012 10:28 am at 10:28 am |
  19. Dr. Ahsan Habib

    I would like to ask Ms. Christine L. two questions. First, Does she recommend growth financed by deficit year after year? USA has seen all of its growth in each year since 1981 with deficit budget. Second, when and how can this debt be paid back and what that would mean to the consumption standard of the generation who is repaying?

    December 9, 2012 10:29 am at 10:29 am |
  20. There is no freeking cliff!!

    Economists are not scientists–their voodoo doctors trying to convince Americans that austerity is the only way to avoid economic disaster. We had a "fiscal" cliff in the 90's and the government defaulted on its debts to gov't employees–the world didn't end, the economy soon after grew to enormous proportions.

    All this fiscal cliff nonsense is just a smoke and mirrors game designed to convince normal Americans to give up social security, medicare, and other social programs–while also minimizing demand that the wealthy 1% pay additional taxes for the opportunities they have exploited in America.

    Don't ever trust anything that comes out of the IMF's mouth–they are vipers whose only interests is ensuring that the bankers get paid for the messes they create. It was the IMF who convinced S. Korea, Thailand, and Malaysia to embrace austerity. Once the bankers got their money, they pulled out their investments and let the country go into economic free-fall. Took over a decade to fix those countries after following the IMF's benevolent advice

    December 9, 2012 10:29 am at 10:29 am |
  21. Blaster34

    Hilarious, an economist from France talking about the economy of the US! Seen the French economy lately? She's just another European Socialist id!ot

    December 9, 2012 10:29 am at 10:29 am |
  22. Tom

    Ok, here we go..Go over the cliff, raise taxes on those making over 250k, cut military spending, cut foreign aide, end the wars, end the drug war, open up medicare to those under 55 who wish to pay so it can balance itself out, cut tax loopholes for companies who ship jobs overseas, crack down on employers who employ illegals, invest in infrastructure and education and am I forgetting something? Oh yea..this will make sure the GOP is done when the economy bounces back without their help.

    December 9, 2012 10:30 am at 10:30 am |
  23. fastball

    "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."
    What's that got to do with anything? She's the head of the International Monetary Fund – and it's sorta a Big Deal kinda, because of the "International" part in front. "International" means all countries across the globe – and last time I check, the USA was just one country among many, no matter how big and important y'all think she is.
    So yeah....when the head of a WORLD monetary fund suggests that the USA pull it's head out of its nether regions, and figure out a way to clean up its mess...the rest of the world might appreciate it. Our markets took a hit when Greece and the EU were messing big a ripple in the international monetary waters would be created if the USA goes down the toilet?? They have EVERY right to ask you to get your shoot together.

    December 9, 2012 10:30 am at 10:30 am |
  24. lefty avenger

    After Having my House Destroyed by Hurricane Sandy and watching President Obama's FEMA do nothing to help along with the Nationwide Insurance company stall and dishonor me and everyone else over this whole Country Deserves just what we got. Let the Republicans and Democrats put this country off the cliff and ruin everything. Both Parties don't help Working Class or Middle Class People, they use us when we are doing well and Abandon us when Disaster Strikes. All the U.S. Government can do is Create Wars to kill poor people abroad and Exploit it's citizens at home. Let them wreck the country, it is all they are good for. We would be better off just Disbanding America and having 50 different states without President Obama and John Boehner.

    December 9, 2012 10:30 am at 10:30 am |
  25. Ron

    Printing baseless dollars and growing economy are two different things. Americans will feel the pain sooner than they hope to.

    December 9, 2012 10:33 am at 10:33 am |
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