THE US 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 yesterday.
"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 Nation, which aired yesterday.
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.
US President Barack Obama and congressional leaders are still trying to negotiate a way to avoid the "cliff" of US$600 billion in tax hikes and federal spending. Failure to do so could likely tip the US economy back into a recession.
In her interview on CNN, Lagarde cited the "fiscal cliff" as the biggest threat to the US economy, saying America is more vulnerable to its own domestic troubles than to anything else happening in the eurozone or China.
The US 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."
Spectacular images of erupting volcanoes
Feedback
RSS
