Fareed Zakaria just sat down with the new head of the International Monetary Fund, Christine Lagarde. They talked about the U.S. deficit and the debt ceiling debate. Here are some highlights. For the full interview, tune in this Sunday at 10am ET/PT.
Lagarde on the consequences of default
Fareed Zakaria: The IMF just released a report in which it said a crisis of confidence in the solvency of the U.S. government would cause a crunching global recession. How worried are you right now?
Christine Lagarde: I am worried because this debt ceiling issue has not been cracked. The issue is being addressed from multiple angles but the debt ceiling is still on the table. The U.S. is the largest economy on the world, one that matters, one that has spillover effects, not just around the borders but on a complete basis, globally. And it’s an issue that is lurking in the background of each and every economy in the world, which is why I think there is a very every high level of pressure and tension so that issue can be addressed and dealt with properly with a solution.
On dealing with deficits
Fareed Zakaria: When the IMF looks at previous examples of debt issues, deficit issues. When you’re dealing with deficits of this magnitude of the U.S. and the eurozone countries, can you do it all with spending cuts, or does history suggest that you need what President [Obama] calls a 'balanced approach'?
Christine Lagarde: It varies – it will depend from country to country and there is no magic bullet. Sometimes we have the best solution because they are straight from the textbook. And it works - on the textbook. But sometimes you have to settle for the 2nd best option - the one that will be feasible the one that will be politically acceptable.
But the States should NOT be only focused on strictly political objectives. It has to be a mixture of political feasibility but based on solid economic rationale. And today the economic rationale is about cracking the debt ceiling and making sure that in the medium term the USA - like many other nations - addresses the fiscal consolidation issues that have to be addressed.
Tune in this coming Sunday at 10am ET/PT to watch Fareed's full interview with Christine Lagarde. In the meanwhile, follow Fareed on Twitter and Facebook, and bookmark the Global Public Square.
How to SAVE Medicare, Social Security, Medicaid and the police, fire, k-12 education, military, defense and homeland security budgets while CUTTING government spending, debt and present tax rates without causing inflation or high interest rates:
Create GOOD PAYING American JOBS with GOOD BENEFITS for American citizens by REPEALING ALL RETAIL SALES TAXES & replace the lost revenue with an IMPORT TAX/tariff on IMPORTED LABOR & MANUFACTURED GOODS. INCREASE the USA FEDERAL INCOME TAX STANDARD DEDUCTION from $5700 (2010) to $15000 for AMERICAN CITIZENS. INCREASE the INDIANA STATE EXEMPTION for non-dependent adults from $1000 to $5000; if disabled, increase to $10000. In addition, ALL AMERICAN CITIZENS over the age of 55 should have their TOTAL STATE EXEMPTIONS INCREASED from $1000 to $10000 and when they reach the age of 65, increase the exemption from $2000 to $15000; if their total federal AGI is less than $40,000. ALL standard deductions and exemptions should be adjusted for inflation. COLLECT a STATE EXPORT TAX on NATURAL RE-SOURCES/COMMODITIES such as coal, oil, natural gas & grains.
REPEAL ALL Business & New Development/Construction TAX INCENTIVES such as tax abatement, tax increment financing, grants, deductions, credits, tax free bonds, earmarks and/or ANY other CORPORATE WELFARE that SHIFTS Business & New Development & Construction COSTS & TAXES (without IMPACT FEES) to other taxpayers that EXPORT AMERICAN JOBS to foreign countries and/or that create POVERTY WAGE AMERICAN JOBS. OR, require these Corporate Welfare KINGS & their Businesses & New Development & Construction to pay a LIVING WAGE, MINIMUM WAGE of $15/hour with good benefits (parent and one child; and adjusted for inflation). COLLECT MANDATORY IMPACT FEES (IN code: 36-7-4-1300, only infrastructure today); but, expand the code to collect impact fees for schools, libraries, parks, police and fire.
Where are the TEA PARTY endorsements for these strategies?
Well, I was initially a tea-partier (until they all went nuts), and I think the intentions of your argument are good and all, but I am going to suggest it's a little more complicated than that . . .
Its good to see someone putting some ideas together and presenting them.
I think if you remove all tex incentives then indirectly you will encourage companies to move more offshore into areas they can influence or bribe. What if we starting taxing imports? If companies want to offshore, then reward finished good with no tax that are 100% made in the USA, partial import tariff on products like Apple that are designed here but produced overseas, and then a full import tariff on products that are 100% made overseas.
The reality is that the playing field is not fair. The Chinese government owns and funds their companies and they subsidize growth and there is very little incentive for profit. The Chinese incentive is for work force productivity and employment. So they can make products cheap and take a loss if necessary because the money eventually winds up in the government treasury. If companies want to take their money overseas and invest overseas and not repatriate their profits to the US and avoid paying US taxes but still sell their products in the US, we need to tax those products until they are equal.
How can we be in a recession and companies are reporting RECORD profits!!
I find it very interesting that Denmark is rated as the happiest country in the world. It is also one of the most highly taxed. The result of their taxation is security. I am first generation Danish, both my parents having been born there. The Danes enjoy free education of excellent quality, free medical care, free care when they are elderly, and more. Why are the Republicans so reluctant to close LOOPHOLES in order to guarantee some of these privileges to citizens here in the United States?
Elsa, Denmark is not termed as THE happiest nations in the world. According to the survey published on GPS a while ago, Australia tops the ranks. Denmark and a few Nordic countries are also on the top ten list.
The GPO and the Tea Party are only doing the middle class a favour, by opposing higher taxes. Those, who are seriously rich don't mind to be taxed.
The new taxes wouldn't be on the middle class but only on the super wealthy? Why does the Tea party oppose that if you as you say the rich don't mind extra taxes.
Closing tax loopholes and increasing taxes on the nations super rich will not damage the economy. These 'job creators' have had a tax break since Bush implemented his tax cuts. Rather than create jobs these elite pocketed the extra money for themselves.
Republicans say they are willing to compromise but this simply a lie. Raising the debt ceiling is not a compromise, it is an absolute necessity at all costs. Simply wanting a spending cut plan is the house of representatives through a temper tantrum until they get what they want.
I still believe the Grand plan was our best option thus far. With 3 trillion in spending cuts and 1 trillion in revenue increase it presents the largest decrease in deficit thus far presented, which is what we really need.
Really!!! If that were so (that the richest do not mind high taxes), then we would not have all the problems in raising the debt ceiling and decreasing the deficit in USA.
Actually, I had a friend whose husband died in a construction accident. Three months later her 12 year old daughter had a stroke, under went emergency brain surgery, but ultimately couldn't be saved.
She went home to pull her shattered life together. Fortunately, she didn't have to sell her home and declare bankruptcy because of all of the catastrophic health care costs.
She seems to have made it through.
Not here though. Cause we're exceptional.
:The GOP and the Tea party are doing the middle class a favour" !!!!!!!!
That has got to be the most stupid comment i have ever heard.
It is not free. Nothing is. You are being HEAVILY TAXED for your free education, free health care and free pensions! You might be happy with the situation where people mooch off of their fellow citizens and getting everything for free. If so, Denmark awaits your return with open arms.
We believe in a free country, where the government does not have to take care of all of our needs and the needs of the moochers, and therefore the government does not have to tax us as much.
Well other nations do not refer to it as mooching, that is an American "fixation" – so apparently is throwing the elderly and disabled under a bus to save the wealthy a few bucks.
I live in Canada and we have a similar situation.we dont call it mooching either. we are more than glad to pay a bit more in taxes to get our free healthcare. I recently had a triple bypass operation and all it cost me at the time was a cab ride home. i got excellent care and do so after with my gp who i can always see on a days notice. Your lobby groups paint a false and frightening picture of our healthcare system which just doesnt hold up to reality..maybe if you get really sick and are faced with thousands of dollars of hospital bills you will think twice
It is interesting that the same people who don't want people, for example, receiving 'free' health care violently object to the requirement that everyone (and everyone does receive health care, whether optimal or not) contribute. That is, the universal mandate.
I think that what they really mean is they should have the freedom to pay for their health care, but should simply die if they for some reason can't or won't do it.
It is a uniquely Christian approach, don't you think?
LMAO yeah the Canadian system is so great that thier wealthiest citizens come to America for what is superior health care.
While that may be true, I don't believe half of Denmark or Canada end up with a zero tax liability in the end (or nearly so). If you are going to be so, as the President says, 'progressive', you can't get those benefits. Everyone wants benefits at the cost of "other people's" money. But you can't have Danish benefits on a Somali tax code.
But our country does tax the hell out of us and the quality of service is not the same. This the point being made about Denmark is that they are paying taxes, slightly more then we do and are getting a lot more in return and the return they get goes much more to quality of life then our system. They get health care, education, etc. Maybe you dont want to accept this but America is not the most educated country in the world. We have such a dynamic representation of all realities from extreme poor and ignorance to extreme wealth and ignorance.
When Congress fails to pass a bill raising the debt-limit, the President will be forced to break the law: either continue borrowing, or raise taxes without legal authority. Seeing nothing else to lose, he'll do whatever he wants (tax the rich, begin another stimulus program) and dare Congress to stop him. This will set up a terrible precedent – Congress can either impeach the President or do nothing. Everyone will realize that the winner of the 2012 election will have complete control over the country. After a cut-throat campaign and widespread electoral fraud, Federal Courts will be inundated with cases. By late December, the US will fall into civil war and our economy's collapse brings down the rest of the world with us.
My goodness, do you know what you're talking about? What you wrote sounds so weird!
Slippery slope fallacy much?
Wow quote the doom and gloom fantasy you have going there – and of course in your little mind, its only the President's fault – go back and sip your tea.
Thank you for the insights Chicken Little.
Actually, when services are actually interrupted, I wouldn't be surprised if there weren't some protests, maybe even riots or violence.
It has happened before. Then we will really be in a pickle.
The lunatic right just loves this stuff - because they are on the edge half the time anyway. Just spoiling for vengeance on anyone who disagrees with their fantasy-land understanding of things. Very, very scary - but there are enough people who are rich, wiley and unscrupulous to manipulate them.
Can't understand why some people consistently vote against their own self interest. (And I don't mean selfish-interest - I mean in the interest of a basically decent pattern of life.)
Voting for Democrats is voting against your self interest big time. They do not serve the average Joe like they would have you believe. They are the ones who live in fantasyland.
Ahh, the Mayan prophecy...December 21, 2012!!
Civil war? really? Gald I am not a liberal then becuase they are going to be wiped out with ease.
What are you then? Do you have the mental capacity to understand that democrat or republican we are all american. We use the same roads, etc. Where is the disconnect inside your head that leads to an understanding that not everyone needs to think like you and see the world that same way you do and those who dont or see things differently bring value to the table and its a major foundation to our system. You are making the argument for a King, where you and the closed minded like you make all the decisions for everyone and those who dont see things the way you do are executed or imprisoned. You dont even present any ideas with your ranting. You sound like a spoiled child throwing a temper tantrum in a store because mommy isnt getting you a candy bar.
Boehner is that you? Shouldnt you be telling someone who is trying to solve the problem NO?
Bring back DSK
Ok, so let me get this straight. There's "no magic bullet" to solve America's problems, but gathering a bunch of Texans and politicians in a sports stadium in Texas to wish the problems away with prayer is the solution?
Look it up, Gov Rick Perry is wanting to pray the problems away. "Dear God, we made a mess of our nation. Please fix our mess. Thank you." Seriously? That's the plan Rick Perry has?
OMG. Where did you find that? I need to read about it after I read the gossip column. He actually believes God will help us??? Whoa. Who is that guy? Make sure to keep us updated your insight adds value to my day.
Perry is among the unscrupulous willing to play to the cult. You think God is going to fix this?
Reminds me of the man who was drowning and prayed for God to rescue him.
A voice from the Heavens said, "Ok. I will."
A little while later a Chinese junk came by and offered to rescue him. He said, No. God is going to save me.
After becoming exhausted, he prayed once more to God.
A voice came from the heavens and said, "What now?"
The man said, I thought you were going to save me!
The voice said - "Hell. I already sent a boat."
Word. I do not believe in God. But make sure you can defend that statement with your God story. . . it is worthwhile.
Right Wing idiots abound!
The U.S will self destruct.
All the $$$ spent on advanced weapons systems as if there's this major external threat is a waste. The threat is within.
All powers eventually crumble – the Romans, the British, etc although in different ways.
I just can't see a way for Americans to, all of a suden, come together after this. These types of acrimony usually create long lasting memory so that what goes around comes around. When a Republican president eventually makes it into office, there would be Democratic congress people who would remember these fights.
Forget about "republican" or "democratic" for a second..
Everyone wants a strong military.. everyone wants to take care of the poor (any civilized country would). But those things costs money..
Giving tax breaks and expecting revenue to increase is just plain ridiculous. Spending money on the military (and I used to work for the DoD.. and would see people either sleeping in their cubes all day and/or playing solitare) that is disproportionate to it's economy is just insane.
ok.. so let's say you don't want to "tax" the rich.. fair enough. but they should also pay their fair share..
Case in point...
You make 100,000 a year, you are paying 7.5% SSI, with the surplus being used to pay for bullets and welfare moms.
If you make 1MM a year, you only pay 7.5% on the first 110,000.. the rest of the $890,000 is not subject to social security tax.
If you make 100,000 , you aren't rich.. and lucky to put money away for retirement.
Come the time to retire, there won't be social security .. and if you are rich, you won't care.
If you are poor, you can collect welfare and medicaid..
SSI (Social Security Insurance) is capped in what you pay in because what you get out of it in annual income is also capped. If you remove the tax cap, you should also remove the payment cap. As the "insurance" part of the name implies, it was designed to provide a level of income based on what you paid in once you reached a certain age (the "risk" part of the equation). If you remove the tax cap without removing the benefit cap or you means test the benefits pay out, then you've transformed it from an insurance program to a welfare program (i.e. the wealthy pay for the benefits of the poor). I'm not wealthy (only 33), but if you asked me, I would much rather take 13% of my salary (what me and my employer pay to SSI) and put it into savings/investments. If I saved an additional 13% of my salary for the next 30 years, I'd be set when I retire. In addition, I could pass that along to my children when I die rather than having the govt keep it. Of course, the govt has already spent it (treasury IOUs) so that's why the system is in trouble. I, for one, am not including SSI income in any of my retirement savings projections.
Why can't we remove the tax cap and keep the benefit cap????? Can't we please think outside the box?
I'm with you. I've been working my tail off for the past 26 years, and see that I'll never be able to retire. I'd love to have my own S.S. tax money in my pocket. Then I might have a fighting chance @ retirement. On the other side, I've seen my own brother and others milk the system for decades only because they are lazy or are drug addicts. Yes, there are poor that need help–THE HELP SHOULD START WITH THEIR FAMILY (Why can't Mom/Dad/Grandma/Grandpa live with the kids/grandkids?-Lack of morals is why. Yes, there ARE MANY WHO MILK THE WORKING FOLKS AND LIVE OFF OF THE SYSTEM-The system being us working schmucks.
It is all Obama's fault. He is also to blame for it being a rainy day and my bunions.
I know. I pulled a muscle in my back and I have been ticked off at him all day!
Your former head was hit by one...
In defense of our national interests!!
Hoovers favorite call, not in a joking way but according to the family...
No magic bullet? Well, why didn't you say so in the first place? If that's all we need, then call Arlen Specter. He invented the last one that was used in Dallas, 1963.
In a Country where debt and decifit have plagued the gov't. Individual credit scores are a thing to boast about, the dream has become paying off debt and hopefully owning a home before you die...can we tell anti capitalists with a straight face that this is the best system? No!
While I like the capitalist structure, something has gone terribly wrong for a long time now.
The IMF should keep its' stinking nose out of American affairs. They are part of the reason this country is in the disaster that it is in. The US should kick the IMF and that useless, money leeching thing known as the "UN" OUT of the US and never let them back in again. Two monstrosities that US would be better off without.
The IMF has now Financially INSLAVED Ireland and Greece and is after Pourtugal and Spain.
They charge Interst on Laons the Countries will never be bale to pay off.
The IMF is a Corrupt Orginization as is the Committie on Forieng relations this woman goes to know as the CFR that Dick Cheney was a Director at.
These people are thieves and liars and should be Indicted along with the Federal eserve.
Ron Paul 2012
The REAL President
END THE FED
RON PAUL 2012! – END THE FED – RON PAUL 2012! – END THE FED – RON PAUL 2012! – END THE FED – RON PAUL 2012! – END THE FED – RON PAUL 2012! – END THE FED – RON PAUL 2012! – END THE FED – RON PAUL 2012! – END THE FED – RON PAUL 2012! – END THE FED – RON PAUL 2012! – END THE FED – RON PAUL 2012! – END THE FED – RON PAUL 2012! – END THE FED – RON PAUL 2012! – END THE FED – RON PAUL 2012! – END THE FED – RON PAUL 2012! – END THE FED – RON PAUL 2012! – END THE FED -
Ron Paul is the Dennis Kucinich of the Libertarians. Both are sweet for their completely principled views.
Both would be complete disasters as presidents.
I see they also cut all of the funding to your elementary school . . .
The IMF needs to get out of our business! Or....are they running our show?
The most critical element in this conversation is certainly getting a handle on our income versus expenses. On that basis Obama's comment about a balanced approach is only common sense. Most individual housholds balance those elements every day, and if necessary expenses are too great, they get another job or do some part time work. That, by the way, is the way several major companies were founded – check it out. Also, pleas that increasing taxes on the very wealthy and large corporations would only stifle growth are completely unfounded. Previous Bush tax cuts for the wealthy only served to make the wealthier fatter, and did NOTHING to stimulate employment – why else would there be such high unemploymnet and such a marked dispartiy in income levels in the US, which by the way are the highest income dispariteis ANYWHERE in the developed WORLD.
Oh, there's a magic bullet alright!!! The IMF just doesn't want to admit it.
END THE FED!!!!
It's true. If there were no Fed - we could have gone straight into a massive depression instead of letting the GOP drag it alll out.
As a matter of fact, we would likely have been in recession since 1980 when Reagan, my former amateur Governor became President.
With either scenario, raising the debt limit to a credit default or government shutdown to a payment default the greenback collapses. Hamilton's central bank with its failed world currency will be abandoned and we'll become a Jeffersonian confederation operating under the Articles. States will create their own currencies from its Treasury's that will be accepted internationally and between the 50. To prevent suffering and hardship the transition will be very rapid.
(FYI->I posted a similar comment to CNN Money)
I would like to ask an honest question. Does these politicians care about losing the Full Faith and Credit of US of America? If any one with patriotism should be complared this to the death of capitalism, death to american dreams, and death to the status of land of opportunities.
I would like to draw some analogies to make my point clear:
First analogy that I would like to draw is losing the "FULL FAITH & CREDIT" (including the thripple-A credit rating) to the DEATH of capitalism (including death to american dreams and land of opprtunity status),
Second analogy is the ever increasing DEBT to a terminal CANCER that we all inherited from several administrations and also due to the style of our governance.
Third analogy is the immdediate measure to fix to this sudden death (full faith and credit), which is to RAISE the DEBT LIMITS, as recommended by credit agencies, renowned economists, and federal reseves, etc to a CHEMOTHERAPY. If we do not do that, it will be in the history– for ever - USA, the world economic power, the leader of the free world defaulted once.
Now, the last comparison I would like to make is the real fixing of EVER INCREASING DEBT to the CANCER RESEARCHES that we do to find a permanent cure for the cancer.
It looks to me that what Mr. Boehner and Republican party is saying is that, we are not willing to undergo a Chemotherapy to get our life extended unless we find a permanent cure to this cancer. This is totally irresponsible.
No Sir, To use your anology
they are saying "we are dying of cancer, perhaps we should stop smoking 10 pack a day" We will go through serious withdrawl but come out the other side much stronger.
Trimming our smoking habit to 8 or 9 packs over the next 10 years will not solve the problem. Paying for it with taxation would be equal to a few less pack a day but adding in an asbestos sanding habit. Why would we want to hurt business both small and large which is where the majority of taxes and jobs are derived.
Smoke up Kumaran
It looks like I am more responsible than these politicians :). I gave up smoking 10 years ago.
I find it sad that Americans feel taxing big business is the solution. News Flash....Big business won't pay those taxes. They will raise the price of their goods and services to offset the tax increase. So in the end the poor and middleclass who consume those goods will pay for it. Our tax code is setup this way for this exact reason....the imbedment of hidden taxes without causing a revolt. Rip on the Tea Party all you want but these people understand this fact and if the rest of you fools would then our politicians would not get away with this anymore.
Nonsense. Corporations have been hoarding cash ever since they don't have to pay it to the Gvt anymore. A little bit of that cash to go to pay education and infrastructure will not hurt anybody; it actually helps corporations in the long run. (In case anybody is wondering what "discretionary spending" means: the above is some of it.
The last time taxes were this low was the beginning of the great depression. We did not come out of the depression until guess what... that rate went back up. It's GREED. Maybe when this is a pic from America the Republicans will vote to raise the tax rate enough to take care of those who can't care for themselves again.
If you don't want to assist the society that you leeched your millions from then you are greedy.
President Kennedy, “privilege is here, and with privilege comes responsibility.”
Taxes for the super rich that is.
Raise the debt limit and the cure becomes worse than the desease. We've been on the borrow treatment too long.
It will never be paid back. Chemo kills the patient. Moody's has already stated that hthe credit rating will be lowered if the federal government attempts to borrow any more money.
And another thing... while you are calling these programs hand outs etc, you need to remember we have paid into them for YEARS. They are not hand outs. I guess if you paid your taxes like a real American you might not think these programs were unneeded. Unless you are super rich.
No thanks, freedom is far more important than security. People who trade thier freedom for security are absolutely shameful.
The Global Public Square is where you can make sense of the world every day with insights and explanations from CNN's Fareed Zakaria, leading journalists at CNN, and other international thinkers. Join GPS editor Jason Miks and get informed about global issues, exposed to unique stories, and engaged with diverse and original perspectives.
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