U.S. Budget Discord Seen as Top Threat to Global Economy

European debt crisis ranks as second biggest worry for investors, poll shows.

Global investors say the state of the U.S. government’s finances is the greatest risk to the world economy and almost half are curbing their investments in response to continuing budget battles, a Bloomberg poll shows.

With the government within weeks of reaching its borrowing limit, 36 percent of respondents cite the nation’s fiscal woes as the biggest threat compared with 29 percent who choose Europe’s sovereign debt crisis and 15 percent who name a slowing Chinese economy, according to the quarterly poll on Jan. 17 of investors, analysts and traders who subscribe to Bloomberg.

Biggest Problem

“Spending, our biggest problem, is not being addressed,” says Ted Madaj, portfolio manager at American Agricultural Insurance Co. in Schaumburg, Illinois, who says he’s trimming his holdings of U.S. stocks.

Tax Rewrite

On potential legislation that would simplify the 4 million word tax code, 58 percent say only “modest changes” will result this year, with 7 percent expecting a comprehensive rewrite and 29 percent anticipating no meaningful changes.

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