The IMF Has This Advice for the Next U.S. President
The next U.S. president will have to act quickly and forestall the looming domestic fiscal cliff to ensure that the world economy does not feel the negative impact, International Monetary Fund chief Christine Lagarde said.
“Whoever is going to be elected or re-elected tomorrow will be faced with that challenge and will have to tackle that issue up front very shortly, because the beginning of 2013 is in two months time,” Lagarde said at the end of meetings between officials from the Group of 20 leading economies. If the U.S. doesn’t act quickly, she said, “all economies…will suffer from the spillover.”
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The fiscal cliff refers to the automatic implementation of the Budget Control Act of 2011, which is scheduled to go into effect at the end of 2012 unless the government takes measures to prevent it. The act entails $7 trillion worth of tax increases and spending cuts over a decade. Neither President Barack Obama nor his Republican challenger Mitt Romney has said much about the cliff. Also related to the fiscal cliff is the issue of the debt ceiling. The country’s borrowing limit is set to be reached by the end of the year, but the U.S. Treasury Department has said that it can employ “extraordinary” measures to ensure the government can function until early 2013.
The looming threat within the U.S. of massive tax increases and spending cuts is causing uncertainty around the globe, Lagarde said, according to Dow Jones. The IMF managing director said global recovery was still fragile and remained “at risk if the needed policy actions are not implemented.”
The global economic leaders, meeting in Mexico City, discussed steps to solve the euro crisis and ensure global economic health and Lagarde said she saw a “shared sense of urgency among all stakeholders.”