2 prominent economists say Bush tax cuts must go
At the National Association of Business Economists Conference in Washington, Alan Blinder and Lawrence Lindsey offered some firm opinions on what needs to happen for the U.S. economy to get back on a solid growth trajectory once more.
A hushed, standing-room only crowd of sympathetic fellow economists gathered in a hotel ballroom in Arlington, Va., yesterday to listen to the Bearded One, aka Federal Reserve Chairman Ben Bernanke, opine on the state of the labor market and reiterate his view that further cuts to the unemployment rate may be harder to come by without a decisive increase in economic growth.
When economists Alan Blinder and Lawrence Lindsey stepped up to the podium after Bernanke, the collective mood at the National Association of Business Economists Conference lightened almost visibly. Unlike prior speeches, their ability to share their views wasn’t constrained by their positions; both are independent. Blinder, who has served on President Bill Clinton’s Council of Economic Advisors and as vice chairman of the Fed, now occupies an economics chair at Princeton. Lindsey, who had been director of the National Economic Council under President George W. Bush, now runs his own economics advisory firm. Neither man is known to shy away from a controversy or two. And sure enough, both had some firm opinions on what needs to happen for the U.S. economy to get back on a solid growth trajectory once more.
1. Say “buh-bye” to the Bush era tax cuts: This was one topic on which both Lindsey and Blinder agreed. Phase ‘em out, says Blinder; it was clear a decade ago that these were unaffordable, and they’re still unaffordable today. Lindsey agreed on the diagnosis, but suggests a slightly different remedy: Extend them for a year, and then undertake reforms that would eliminate them.
2. Eliminate disincentives to work: Something else that is unaffordable, in Lindsey’s view, is long-term unemployment insurance, at least as it is presently designed. “It’s a lovely thing to do,” he said, but it’s not realistic and creates incentives that can exacerbate long-term unemployment. Why not, he suggests, give beneficiaries a lump sum payment instead?
3. Find new sources of revenue: Government has a revenue issue, says Alan Blinder, and needs to find a way to fix that. He thinks it’s time to put in place a 1 percent to 2 percent carbon tax. (He didn’t offer up any specifics.)
4. Eliminate the income tax: Lindsey favors another kind of tax – doing away with an income-based tax and replacing it with a value-added or consumption-based tax. “Cash is a fact; income is an opinion,” he quipped, pointing out that the measure would simplify the tax code.
Economics may never escape the label of being the dismal science, but that doesn’t mean debating economic issues has to be dull, lifeless or depressing, as Blinder and Lindsey proved.
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We can comment all we want, and this is good, but our only option to do anything (except a few hundred thousand people marching, in person, in front of the Capitol Building like we did in the 1960s and 1970s) is to VOTE!
REMEMBER: VOTE ON NOV. 06, 2012
SIGNED, WE THE PEOPLE THAT ARE GETTING THE ROYAL SHAFT AGAIN
Final consumption sale tax.
When the people buy $100 in groceries and the clerk adds $5 for local tax, $15 for state, $35 for federal tax and $45 to pay off the debt, the s**t will come out of the American peoples head about the cost of government. Socialism well end. Then give the American people the direct right to decide what they are willing to pay for for government. Government will not only be dramatically reduced, it will become considerable more productive.
We have learned to vote ourselves funds from the public trust until we are bankrupt.
On the surface, there is a lot of support for tax reform and increased simplification of the revenue code. However, all of the popular alternatives (flat-tax, consumption tax, "fair-tax", etc.) are popular because most taxpayers assume the result will be a lower personal income tax burden. Unfortunately, when the stated goal of reform is to increase revenue, most individuals will pay MORE tax. You don't need to be a CPA to figure that one out.
And, I have yet to hear an explanation on how a consumption tax would not be horribly regressive.
But as long as the government is fraught with waste, abuse, inefficiency, and long-term promises that cannot be kept, taxes aren't the problem.
It seems to me that point one and point two are incompatible. When you raise taxes you ALWAYS de-incentivize work.
Point three "Government has a revenue issue". It seems to me that government has a spending issue and until that is addressed it will ALWAYS have a revenue issue. If the goal here is to cut the nation's debt then spending must be cut. The Mecatus Center studied over 100 historic examples of attempts at debt reduction in 20 different countries and found that increasing revenue never worked to cut debt.
Point four finally something that makes sense. The Fair Tax system is definitely the way to go. We need to adopt it before another nation does and leaves the U.S. in the ash heap of history
It is a total shame when the government tells you that they should raise your young with school systems that are the worst in the developed world. Tell you what to eat while they approve foods full of carcinogens and pesticides. Tell you how you should budget your home financing while they overspend there revenue by 200%.
The hypocrisy of the federal government is so far out of the real world’s understanding of sensible decision making that there is almost no way to bring the snowball back to the top of the mountain. All you can do is try to slow it down.
I agree that the problem is a spending one however if there are no consequences to overspending and there is no mechanism to incentivize the reconciliation of the federal budget the problem will continue to be the driving issue.
If the boatload of economists in the US are so smart, then why is the Federal Government in near bankruptcy?
Um, because the politicians who write the spending and tax laws aren't economists?
Suzanne, don't you think the correct title for this article should have been "2 prominent economists say Obama tax cuts must go"?
It is time for the news media and liberals to understand and accept the fact that the Bush Tax Cut expired December 31, 2010. In December 2010 the Democratic controlled Senate and House past the "Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010" bill and forwarded it to the President. On December 17, 2010, President Obama signed this bill into law. When President Obama signed this bill into law he accepted ownership of the tax cut for the rich. However, he, his fellow Democrats and the liberal media continue to blame Bush.
Items 1, 3, and 4 in their program are all massive tax increases (#4, a VAT, is a plan to hide the tax so it can then be raised some more). Sucking trillions of dollars out of the economy is not a treatment that will cure the economy (any more than bleeding patients was a good medical therapy).
In addition, these three items violate their second item, as the taxes are a massive disincentive to work.
This isn't a recipe to balance the budget or cure the economy. In fact, it will only make the budget mess worse, as tax increases never bring in as much revenue as the taxers expect, and tax increases lead to even bigger increases in spending, making the deficit worse. The economists' proposal would have the USA following the lead of Greece.
The soluition is not diverting ever more of our economy into government, the solution must be reducing government spending (hopefully, that isn't politically impossible at this point).
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Breaking up big banks is an untested solution to the too big to fail problem that attempts to isolate and dismantle large, troubled institutions while protecting the rest of the economy.
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