The U.S. economy would be faring much better were it not for the "self-inflicted" wound of tighter fiscal policy, the head of the International Monetary Fund said on Tuesday.
"The U.S. is not doing as well as it could be, because of self-inflicted fiscal wounds. This year alone, fiscal adjustment will constitute an enormous 2.5 percent of GDP," IMF Managing Director Christine Lagarde said at the Brookings Institution.
She said the challenge was not the near-term fiscal outlook for the longer-term one, given the pressures of healthcare and Social Security spending.
"The next couple of years are going to be quite positive looking. But if nothing is done about the medium and long-term horizon ... then the picture is a lot bleaker," Lagarde said. "This is the major challenge facing the U.S. economy today, and it must be met."