Zandi: Economy can handle $4 trillion in deficit cuts

{mosads}“Global investors will revolt. Interest rates will go up, and we would be in a vicious cycle,” he said.

Zandi is optimistic on economic growth and forecasts 4 percent GDP growth in 2012 if a deficit-reduction plan is in place. He said two other risk factors could derail his forecast: rising oil prices and the continuing foreclosure crisis.

The coming months will see increased sales of foreclosed homes driving down housing prices, he said. Meanwhile, sustained $4 per gallon gasoline will take $125 billion out of consumers’ pockets by the end of the summer.

Zandi continues to say that the Obama stimulus package staved off a worse recession and offered praise for the December payroll tax cut. He said if that had not been enacted, America could now be facing a double-dip recession. 

He also said that any failure to raise the nation’s debt ceiling would be a “fiasco.” He said results are so terrible, he is sure both parties will agree to raise the borrowing limit before the U.S. defaults. The Treasury has said Aug. 2 is the deadline for action.