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Neither US Party Serious About Cutting Deficit: Roubini

Neither US political party is willing to make the choices needed to bring down the crippling US budget deficits, economist Nouriel Roubini told CNBC.

Nouriel Roubini
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Nouriel Roubini

As Washington lawmakers begin hammering away at President Obama's budget proposal released Monday, the New York University professor said deficits will continue until the country makes a significant political change, which he targeted as next year's presidential and congressional elections.

"Democrats are against reforming entitlements. The Republicans are against raising any taxes," said Roubini, who also is head of Roubini Global Economics. "The path of least resistance until after 2012 are going to be budget deficits above a trillion dollars."

At the same time, Roubini refrained from any dour economic predictions, at least for the near future.

Renowned for forecasting the financial crisis and sometimes called "Dr. Doom," Roubini said the US economy likely will grow at about a 3 percent rate this year and the stock market also could continue to see gains, at least in the near term.

After losing more than half their value, the Dow and S&P 500 are within reach of their all-time highs reached in October 2007.

"Usually there is not a 1-to-1 relationship between the stock market and the economy," Roubini said. "This year some things are going well. The economy is improving, emerging markets are doing well, the corporates are doing well so far. But there are a significant number of downside risks."

Among the challenges besides the budget deficit are high unemployment, a double-dip in housing, weakness in euro zone economies, and the risk of inflation from emerging markets.

Those risks are exacerbated by the lack of policy response, he said.

"We're kicking the can down the road," he said. "We're not doing anything about the budget deficits."

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