Going over the fiscal cliff could cause a U.S. recession next year, Olivier Blanchard, the International Monetary Fund's chief economist, told CNBC’s “Squawk on the Street.”
“If the fiscal were to happen, it would be a major macroeconomic event,” Blanchard said. The fiscal cliff is when a host of tax cuts expire and automatic spending cuts kick in at the end of the year.
Blanchard said the IMF’s 2 percent U.S. economic growth forecast is based on fiscal consolidation of about 1.5 percent of gross domestic product next year, but the fiscal cliff would represent a 4 percent consolidation. “It would probably kill growth in the U.S. next year and probably kill growth in advanced economies,” Blanchard said.
He added, “I think that if the U.S. fell off the fiscal cliff, I’m quite sure we’d see negative growth in the U.S. next year.”
CNBC
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