2010-01-30 CNN
Well, the big question for most taxpayers, are we getting the most bang out of our buck?
Our next guest says that the answer to that is a big fat costly no. Jeffrey Miron has some pretty impressive credentials. He's a visiting professor in the Department of Economics at Harvard, and is also tied at MIT and the University of Michigan.
All right, Jeffrey, I think it was about a year ago, you said that this stimulus package was a bad idea.
You still think it is?
I still think it's a bad idea. And I should emphasize it's this stimulus package that I'm criticizing, because it was focused especially on spending rather than being focused on tax cuts. When you decide you're going to spend a lot of money quickly, it's very hard to spend it well, and a lot of the things we are spending it on are not especially productive or they are mainly just shifting people from jobs they already had into different government jobs. Had we done tax cuts, we would have put that purchasing power in the hands of individuals and firms, and that would have lead on average to much better decisions about how that extra demand would have been spent.
All right. Let's talk about the tax cuts for a minute. Because Jeffrey Sax, and you know Jeffrey Sax, highly- respected economist, said -- let me address that tax issue. You know, he says there is no room, nor case for broad-based personal or corporate income tax cuts or credits or rebates. He said the deficit is hemorrhaging and will do so for years to come. And with aging, health care cost increases, etcetera, the underlying chronic deficits will tend to rise, not fall. We will therefore need increased, not decreased taxes.
Well, Jeff is taken as given that we need to do all the spending that we are doing. But my position is that a huge amount of existing government spending is actually not especially productive. And over the long term, we should be cutting it very substantially.
And he is ignoring the evidence, okay, which part of it produced by Christina Romer, the chairman of the council of economic advisers under Obama, which finds that tax cuts are very effective in stimulating the economy evidenced by a lot of other people. It doesn't find much evidence that spending increases our effect at stimulating the economy. Either one, of course, adds to the deficit in the short term. But over the longer term, the tax cuts probably add less because they help make the economy more efficient and that leads to more income etcetera that can be taxed going down the road.