I thought this was very interesting. Four economists from the radical, socialist/Keynesian Paul Krugman to the Harvard conservative Kenneth Rogoff plus two more economists from two different Administrations, one left and one right.
Economy Update with David Walker, Kenneth Rogoff, Paul Krugman and Jared Bernstein - 37 minutes
Charlie Rose, June 3, 2011
These are the things that struck me as consensus regarding what we should do now:
· Government cannot do anything significant about unemployment.
· Increasing the debt is wrong but in the short term government should avoid large scale layoffs.
o Rogoff said that taking advantage of cheap borrowing now is wrong because rates can turn on a dime while debt cannot.
· Keep monetary policy loose; do a Quantitative Easing 3; target higher inflation – perhaps 4%.
o Those many foreign nations that hold our debt hate quantitative easing which basically devalues the dollar and causes inflation. Therefore they rail against this sort of policy. But we have millions out of work and we need to address those interests first. If we don’t get our fiscal house in order, their investments will be worthless anyway.
· Broaden the tax base and at some point, raise revenue.
o Eliminate all tax deductions and lower rates.
o Implement some sort of consumption tax.
· Home mortgage debt relief may be critical to restarting growth. All agree that such a program would be extremely complex and very unpopular but mortgage debt remains an important impediment to growth.
Note: Paul Krugman is adamant in his commitment to Keynesian and New Deal policies. He would borrow massively and bring back the WPA. He is delusional about how these policies worked during the Depression and what actually brought the Depression to an end. He hates it that the Administration, legislators, popular opinion and other economists are too dumb to agree with him.
That said, he acknowledges that none of his policies are politically conceivable today. When he occasionally speaks pragmatically rather than ideologically, he seems to support the consensus.
Frankly I have thought for some time that Krugman is deeply disappointed that he has missed the only chance in his life time – we hope – to try out his Keynesian programs. He is also bitter that the most progressive Administration since FDR failed to include him in any way.
It seems clear to me that there is growing expert and minority bipartisan support for tax reform that includes the principals of broadening the tax base and raising revenue. This would be accomplished by eliminating deductions, lowering rates and adding a consumption tax. Rogoff thinks we might have 15 years to get the government fiscal house in order.
There is no support for these things from any Party leadership. The angry part of popular opinion blindly rejects both tax increases and benefit cuts. Never the less, I am reluctantly persuaded that the experts are probably right. We need to stop the hemorrhaging but we cannot put large numbers of government employees on the street yet. Entitlement reforms must come but there are no short term magic bullets available. We need time to address the inflation of provider costs and time to lead the selfish and delusional citizenry to the light.
Look for leaders; look for people who tell the truth. Obamacare will never be repealed even though it does make things somewhat worse and it does not bend the curve of the core inflation problem. A consumption tax puts everybody back in the game – 51% of workers pay no income tax – and it is not as regressive as it looks – rich people spend from their income and from their wealth. The key to reducing the size of government is in reducing complexity – start with the tax code.
Don’t give up. Don’t fall for the propaganda. Vote for the best people available and vote in the primaries.
Here’s a column by a Democrat that urges replacing the corporate income tax with 5 percent value-added tax. Now admittedly this Democrat is an old senile, red state one but in this case, he makes sense. The Simpson-Bowles report was an excellent product and made similar revenue suggestions. [In support of calling Simpson-Bowles excellent, I offer as evidence the fact that few politicians signed up, not even the President that authorized the work.]
Value-Added Tax Will Solve Debt, Jobs Problems
By Ernest F. “Fritz” Hollings, Jun. 08, 2011
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