In an interview with CNN yesterday the IMF chief said the US needed a combination of automatic spending cuts and tax hikes to take effect in January
“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,” Lagarde said in the pre-taped interview aired on Sunday.
She said the fiscal woes are now the biggest threat to the U.S. economy which is less vulnerable to what happens outside, in Europe for instance.
“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.”
Lagarde predicted the immediate aftermath of falling off the ” fiscal cliff” would be “lack of confidence” and the markets would react very quickly.