reagan advisor weighs in on stimulus bill
i was watching fox news, and they were arguing about the stimulus bill (as expected). a woman mentioned that one of reagan's top financial advisors supported the bill...so i researched it.
http://www.pbs.org/newshour/bb/busin...ate_01-29.html
for those of you who don't care to read the entire transcript (actually, 2 economist weighed in) i'll do a few cliffs. feldstein is the ex-reagan advisor
MARTIN FELDSTEIN, Harvard University: Well, one difference is that I would say that it's not enough to make a difference. I think that was Jamie Galbraith's phrase in terms of the stimulus.
We're looking at an enormous, enormous decline in consumer spending coming along and an enormous decline in home construction, so there's a very big gap in the economy. And so that's why we need to have a fiscal stimulus plan to fill that gap.
And filling a quarter of the gap or filling a half of the gap isn't enough. It has to be more substantial or we're going to continue to see economic declineMARTIN FELDSTEIN: Well, it's a plan of about $400 billion a year for two years. Now, not all of that $400 billion is going to turn into additional spending. A lot of the tax cuts, we know on the basis of what happened with the tax rebate last year, are basically going to be saved. So they're not going to add to spending.
And in the spending programs, many of them are going to be stretched out over a long time. The water and energy program, only one-fifth of it will happen in the first two years, this year and next year.
So what we have, then, is something that's going to be much smaller than the size of the hole that's left by the decline in consumer spending and the decline in housing construction. That's what worries me about this plan.MARTIN FELDSTEIN: See, what worries me is that we're talking about really big numbers. We're talking about adding $800 billion to the national debt. That means higher taxes in the future, higher tax rates, hurting the economy in the future. So we can't think of $800 billion as just, "Well, this is a down payment. We'll do this, and then we'll come back in a while and do some more, and then perhaps come back and do some more."
We've got to spend these tax dollars, these deficit dollars, in a constructive way and the most constructive way possible for helping to bring the economy back. And there are a lot of nice things in this bill that really don't do much of that.
So we shouldn't be wasting this money on a variety of things which really don't add to employment and additional national spending.what i like about this part, is it doesn't necessarily say "CUT TAXES." it's using tax breaks, to get people to spend. personally, i feel like payroll tax cuts are more long term, and these tax break incentives are more short term. i believe both will be necessary in order to get the economy back on track.MARTIN FELDSTEIN: But cutting the payroll tax, like the $500-per-person tax cut that the bill contains for two years, those are going to mainly go into additional savings. So if we really want people to spend, we ought to have incentives to spend.
So we ought to have something like an investment tax credit for businesses and a consumer durable and home improvement credit for households. Why not say, if you buy a car or if you buy a fuel-efficient car, you'll get a very substantial tax break as a result of that, if you put money into fixing up your home similarly?
there was also another interview with feldstein where he suggested putting more of the money into replacing/rebuilding the military equipment that has been lost in the iraq/afghan war. once again, this is not a bad idea for the short term. i do agree that the bill needs some reform, but people need to understand we can't just focus ONLY on the short term. in short...feldstein supports the bill, but feels it needs those few items added. the other economist who weighed in on the bill, he was pretty much ALL FOR IT.
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Originally Posted by BanginJimmy
