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Former CBO Director Douglas Holtz-Eakin on the office’s warning to the administration.
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-- of the Congressional Budget Office issues a major warning.
If congress doesn't extended.
The bush tax cuts and moves ahead with spending cuts that does that.
Analysts if we get this tax -- -- thing that is a massive tax increase on January the first coupled with a huge spending cuts.
Tax we're getting -- come in the Congressional Budget Office says we go into recession.
We're joined now by former CBO -- Douglas Holtz because he has witnessed in DC.
That I yeah I take it you believe that accurate dog coming you get a whopping taxis and a spending cut -- -- gonna get recession.
I think -- right and it's actually quite extraordinary for the CDO to predict a recession that I can remember the last time they did it.
So obviously the right thing to do is avoid this -- An interest in part reported they say the even better thing to do will be to avoid that the fiscal cliff in the recession but also take several long term debt problems and that's the right package.
Okay -- do you expect the right package to come along because we're not gonna get up package before the election that would seem to me to be highly unlikely.
And after the election you've got a lame duck congress which must act before January the first and made -- package like you talking about.
Seems kind of distant and unlikely doesn't.
Well you can do the math I mean does the houses already passed a bill that would substitute some mandatory savings for the sequestered guerrilla attacks for that -- spending cuts.
Though they'll pass a bill to extend the tax cuts and they've got in place a budget.
It takes care of the debt problem.
The difficulty lies in that the senate side where the the senate Democrats haven't had a budget in three years and have have no plans to -- to take on the extending tax cuts also.
You know.
If he even got -- an agreement in the house and senate the president hasn't weighed in on this so.
It's hard to get the politics right when two thirds of the necessary ingredients are sitting on the sidelines and watching us hurtled toward fiscal Clinton.
Do you think the politics will get rights in the November election and what I'm talking about is a sweeping victory for either side could that would that would remove.
There's the uncertainty and it would give us a new political balance either side if the left wins big.
We've got agreement if the right wins big we've got agreement all.
All this messing around is is thrust aside is it.
I don't see any route for either Republicans or Democrats -- that was sixty votes in the senate.
That means -- always have an interest minority that has substantial power in the congress.
But the second -- Stuart is that I don't think this is going to actually wait until the lame duck wait until next year to become an issue.
Investors were looking an increase in the dividend tax rate from fifteen to 44%.
We're gonna start getting nervous in September and October -- start dumping their dividend paying stocks we're gonna see market turmoil.
Those -- contractors who I have contracts have a government that are gonna get renewed because of -- impending cuts in January we're gonna start to make noise.
We're gonna see the fallout from this well in advance of the election.
And that's gonna put some pressure on the president that's gonna put some pressure on the senate Democrats actually get something done I say there's no chance of a real Virginia wind tax money get -- -- I'd I just can't believe it would have they -- -- -- is why you came to this country right institute's next director.
-- quick question.
Watch the current state of the economy.
President Obama's putting -- -- shine on it saying it's going in the right direction I disagree I say it's weakening as we speak a what are you side.
I say it's quite weak always because we're growing so slowly were always susceptible to bad news bad news happens all the time -- -- -- in trouble in Europe.
The fact we don't have a pro growth policy -- the gives us a good trend rate of growth.
Always leaves -- susceptible.
The thing I'm most worried about is not jobs which are big deal but the fact that even those who have jobs are not prospering we have seen zero.
Zero real disposable income growth in this recovery he can't really make progress that way got -- Douglas Holtz -- a pleasure thanks for joining us appreciate you -- it.
