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