Goldman Sachs chief executive Lloyd Blankfein has launched a scathing attack on the US government's austerity program, arguing growth will derail significantly once the Bush-era tax cuts expire in January.
Blankfein said with the prospect of a fiscal cliff hanging over the US economy, which economists forecast could wipe around 3% off GDP, now is not the right time for the US to be carrying out austerity measures.
The Daily Telegraph reports that during a talk at the Canadian Club of Toronto Blankfein argued severe cutbacks are not a good 'medicine' for US GDP growth.
"You cannot austere yourself into a higher GDP, and it is not going to be very good if the medicine kills the patient," he said.
"I am all for implementing budget changes that accelerate over the long term, but in the short term I would not take too much money away from people or cut back on a lot of expenditure programs."
Fund managers have expressed fears over the knock-on effect the US fiscal cliff will have on global GDP growth.
In an interview with Investment Week in July, Katherine Garrett-Cox, CEO and CIO of Alliance Trust, said she expects global growth will remain stagnant next year, as the US faces the strong prospect of slipping back into recession.
"The potent combination of tax increases and bulkier spending cuts coming into effect from next January could knock 3% to 4% off GDP," said Garrett-Cox.
"It could be argued the US is now an even scarier place than the eurozone, given maturity issues are going to run out and the Bush tax cuts programme is also coming to an end."
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