Blankfein: Washington's Dysfunction 'Impedes' Economy

Friday, 14 Jun 2013 08:21 AM

By Dan Weil

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The inability of Democrats and Republicans in Washington to reach agreement on issues like the debt ceiling spells trouble for the economy, says Goldman Sachs CEO Lloyd Blankfein.

"There are negatives overhanging [Washington] that will impede the economy that they should stop doing," Blankfein said at a Politico event Thursday, the news service reports.

"Obviously, one thing ... is the poisonous anti-compromise environment in Washington makes things very difficult."

Editor's Note:
The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

As someone trying to manage risk, "I don't like the ballooning fight over the debt ceiling," he noted.

The Treasury Department predicts that the government will hit its $16.7 trillion debt ceiling sometime after Labor Day, meaning the limit will have to be raised in order to avoid default. But some Republicans disagree and oppose a debt ceiling increase.

Meanwhile, Blankfein said the economy is improving, thanks partly to the shrinking budget deficit, but continued growth isn't a certainty.

"It's a very low risk of the U.S. slinking back into recession, but it's not zero," he declared. "There are worries on the horizon, but a lot less than there were before."

Economists surveyed by The Wall Street Journal last month anticipate gross domestic product growth of 2.4 percent this year, matching the first-quarter rate.

"The economy is in vastly better shape than it was a year ago, two years ago, three years ago," Allen Sinai of Decision Economics told the paper. The three key actors for the economy —households, banks and businesses — are doing better than they have in years, he said.

The World Bank just raised its forecast for economic growth in the United States to 2.0 percent for 2013, up from the 1.9 percent forecast in January.

Editor's Note: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown

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