IMF Head Lagarde Warns U.S. Lawmakers on Spending and Taxes

ECONOMY -- July 3, 2012 at 4:53 PM EDT

IMF Head Lagarde Warns U.S. Lawmakers on Spending and Taxes

IMF Managing Director Christine Lagarde warned both Republicans and Democrats Tuesday they likely need to come up with better solutions for dealing with the so-called "fiscal cliff" facing America after the election. At the end of 2012, Bush-era tax cuts are set to expire and scheduled spending cuts would take effect unless Congress and the President can come to an agreement on alternatives.

So far, some leading Republicans in Congress have called for deeper cuts to deal with the U.S. debt problem. For his part, President Obama has said he does not favor extending all of the Bush-era tax cuts when they are set to end.

But in an interview with NewsHour correspondent Judy Woodruff, Lagarde said the initial posturing from both sides may jeopardize a tepid recovery in the U.S and create problems for the global economy. She discussed those subjects and the European financial crisis as the IMF released a new report about the state of the American economy.

Here are two excerpts from that interview. In the video below, Lagarde lays out the report's recommendations, projecting what she calls "tepid" growth, and warning of two major risks to the economy:

And here's what Lagarde had to say about the U.S. debt and the Bush-era tax cuts:

Watch the longer interview that aired Tuesday on the NewsHour.

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