"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," said Lagarde in the interview.
She continued by saying the fiscal cliff is the biggest threat to the US economy and if no agreement is made before the deadline, the US will fall back into recession since the country is more vulnerable to its own domestic troubles than what happens abroad.
Obama's most recent proposal to stave off the "fiscal cliff" calls for USD 1.6 trillion in new revenues, achieved in part by letting the Bush-era tax cuts expire for the wealthiest Americans, as well as USD 600 billion in spending cuts and a handful of other measures.
The Republicans put forward a counter offer that is made up of USD 900 billion in spending cuts and USD 800 billion in new revenues achieved through tax reform that precludes rate increases.
IMF Managing Director Christine Lagarde has said that the US needs a balanced, comprehensive approach regarding the looming “fiscal cliff” to tackle its fiscal woes.
In an interview on Sunday, Lagarde expressed her opinions regarding the US administration and congressional leaders’ negotiations to avoid the cliff of USD 600 billion in tax hikes and federal spending, which will automatically take effect on January 1, 2013 if no deal is reached.