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.

By The Fiscal Times Mar 27, 2012 3:38PM
By Suzanne McGeeThe Fiscal Times

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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47Comments
Mar 27, 2012 8:43PM
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Someone, how conveniently you forget that the Republicants held the bill hostage until the Dems agreed to extend the Bush tax cuts. I love revisionist history.
Mar 27, 2012 8:06PM
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The tax cuts don't need to go, what needs to go is Democrats and SPENDING/BORROWING.  We take in 2.2 Trillion and SPEND 3.8 TRILLION.  Slash SPENDING 1.6 trillion and the problem is solved.

 

We don't have a taxing problem, we have a SPENDING problem.

 

Think of it as a family...  We earn 44,000, Spend 76,000 and have debt of 312,000...

 

See the problem? 

 

Fire another 2000+ Democrats like we did in 2010, they just don't seem to get it....

Mar 27, 2012 7:55PM
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Yes, we should listen to these folks, not.  They are the same ones devauling the scant $$$ we have in our pockets while racking up about half of the current debt overages.  Current POTUS doubled down on the Government Credit Card.  Scrap tax code, enact binding balanced budget legislation, and institute term limits.  Lock in cuts in government budgets to pay down debt.  Don't care, but I'd cut all government budgets X%; so no whining about unfair cuts.  Sorry to give you the X%, I'd need to get Geitner's Excel spreadsheet.
Mar 27, 2012 7:55PM
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Everybody pays the same %%%% no exceptions!
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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.

 

  

Mar 27, 2012 6:01PM
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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.

Mar 27, 2012 4:59PM
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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.

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