IMF chief says U.S. needs blend of spending cuts, revenue raising

WASHINGTON Sun Dec 9, 2012 9:48am EST

International Monetary Fund (IMF) Managing Director Christine Lagarde speaks during the conference ''Growth and integration in solidarity: what strategy for Europe?'' with top financial officials at the Economy ministry in Paris November 30, 2012. REUTERS/Charles Platiau

International Monetary Fund (IMF) Managing Director Christine Lagarde speaks during the conference ''Growth and integration in solidarity: what strategy for Europe?'' with top financial officials at the Economy ministry in Paris November 30, 2012.

Credit: Reuters/Charles Platiau

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WASHINGTON (Reuters) - The United States needs a balanced, comprehensive approach to tackle its fiscal woes that should include a mix of spending cuts and revenue increases, the head of the International Monetary Fund said on Sunday.

"My view, personally, is that 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 taxes or creating new sources of revenue, and cutting spending," IMF Managing Director Christine Lagarde said in a pre-taped interview on CNN's "State of the Union," which aired on Sunday.

Lagarde discussed her views about Washington's impending "fiscal cliff," a combination of automatic spending cuts and tax increases that will simultaneously take effect in early 2013 if lawmakers cannot arrive at a deal.

President Barack Obama's administration and congressional leaders are still trying to negotiate a way to avoid the cliff of $600 billion in tax hikes and federal spending. Failure to do so could likely tip the U.S. economy back into a recession.

In her interview on CNN, Lagarde cited the fiscal cliff as the biggest threat to the U.S. economy, saying America is more vulnerable to its own domestic troubles than to anything else happening in the Eurozone or China.

The U.S. economy "is less vulnerable to what happens outside, for instance in Europe," Lagarde said.

"I'm not saying that there will be no consequences out of a crisis that could happen in Europe. But the consequences would be relatively minor."

"It is more exposed to its own difficulties and to its own issues than to what happens elsewhere in the world, because it is such a large player."

She told CNN she remains optimistic that lawmakers will come up with a plan before the fiscal cliff deadline.

"My confidence is deeply rooted in the affection that I have for the United States," she said. "I believe that there is a sense of being practical, addressing the issues rather than, you know, dancing around and avoiding issues."

(This story corrected name of CNN show in the second paragraph)

(Reporting By Sarah N. Lynch; Editing by Todd Eastham and Bill Trott)

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Comments (4)
americanguy wrote:
Man, is she clueless. Everyone, especially wealthy Republicans, knows more tax cuts for the rich is the only way to make the USA economy better. It worked so well for Bush, and gave us the greatest economy in history and 1% unemployment as promised. How could anyone suggest otherwise?

Dec 09, 2012 9:53am EST  --  Report as abuse
fritzk wrote:
I like the IMF chief. She has always seemed to be too straightforward and clear thinking to fidgit around a simple truth. She knows as well as anyone that it is the demagogues on the far right who have taken years to create this idiocy. Why offer the same reasoned suggestion which everyone with two brain cells has already offered (And voted for) knowing full well that the rabid right will ignore it in favor of mindless, blind intransigence? Better she would call for reason to be established where reason is absent.

Dec 09, 2012 10:05am EST  --  Report as abuse
randburg100 wrote:
Isn’t the same lagarde who wrecked the French economy…they got rid of her by dumping her on the IMF to wave her handbag around….

Dec 09, 2012 11:06am EST  --  Report as abuse
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