President Barack Obama will have to work together with the Republicans to ensure the US economy grows so that the country can avoid a Greece-like scenario, Rep. Paul Ryan, Budget Committee Ranking Member, told CNBC Monday.
Source:gpoaccess.gov
Rep. Ryan Paul from Wisconsin
Some analysts have been warning that the US policy of devaluing the dollar by printing money and increasing its public debt will backfire at some point.
On Sunday, Richmond Federal Reserve President Jeffrey Lacker indicated he opposed the Federal Reserve's new round of monetary easing because it was too risky.
The US needs low and predictable tax rates, as well as predictable regulations, Ryan said.
"We have spending that is out of control… we have the Fed debasing the currency," he said.
"I would simply argue that the basic macroeconomic foundations are going in the wrong direction. That puts us on a path of managed decline."
The country needs to do its reform on its own terms or it will be force into a vigilante-led, "Greek-style reform," Ryan added.
He said the Republican's victory in the mid-term elections was actually a repudiation of Obama's policies.
"We don't think this is a validation of Republicans, we don't think we've become all of a sudden popular," Ryan said. "It's the most stinging repudiation you had in a generation."
"We owe the country an alternative. It's our obligation to give the country an alternative" to and economic reform that is forced by vigilantes in bond markets, he said.
Asked what will shape what course the reforms will take and whether they will be forced by markets or not, Ryan said: "I think what happens in the interim 2 years will determine that."
"If the President can give us some fiscal discipline in spending, somewhere, that will buy us some space in the bond markets, at least I hope it will," he said.
He slammed fiscal authorities for not offering stable and low taxes to encourage growth, relying instead on the Fed's dual mandate of keeping price rises in check while ensuring the economy grows.
"Fiscal policy is terrible, it's going in the wrong direction… and now they're trying to force the monetary authority to overcompensate," Ryan said.
The Fed should have a single mandate, price stability, and growth should be brought on by the fiscal policy, he added.