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Beacon Economics founder Chris Thornberg on the spending cuts and tax increases needed to rein in the government’s rising debt.
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-- -- new running mate Paul Ryan bringing the budget debate back front and center into the campaign only a few months are really left -- tell you all go to the voting polls but.
The US is scheduled to see tax hikes and spending cuts known as a fiscal plan.
So the question is will this -- stop the US well from going over the edge Chris sold load is a founding -- group -- -- -- economics he joins us now and Chris you say that.
Representative Ryan's budget plan doesn't make any sense why.
Well listen I give him a lot of credit for tackling some of the large issues having -- the social insurance programs.
We know ultimately Medicare Medicaid Social Security not sustainable on their current form and they have to be changed.
On the other hand the budget plan he puts forward says he's not gonna touch cut he's not going to raise taxes he's not gonna cut defense.
But he's going to fix our budget problems with through sheer spending cuts elsewhere in the budget and frankly that's smoke and -- you can't possibly do that.
We're gonna have to accept the fact that taxes are gonna have to go up somewhere from where they currently stands the only way you can do it.
Well the bush tax cuts as we know have been in place for years and now what through a combination of issue as we have -- more than trillion dollar war were running at a bunch of other issues as well.
We have a massive hole in our deficit so well at least when it comes to filling -- -- just a bit.
Does the Ryan plan do anything along those lines with the cuts and spending.
Oh sure look any budget fixes the fiscal cliff remember the fiscal cliff.
Is nothing more than the policy outcome having to do with a failure for congress to come -- -- with a plan of action.
Ultimately the buck is closing on its own doll by itself from -- our budget gaps closing all by itself this point in time as the economy starts to recover some.
But ultimately we have we as a nation have regard a path forward the easiest way to do this is to cut spending.
To push for productivity increases at both state local and federal government levels.
But at the same -- -- knowledge that part of the plan has to be some increase in taxes and you say there are two issues that even a bigger -- for the US economy right now what are those.
Well again ultimately if we do over the fiscal cliff and nothing is done about it a couple months that will create a recession is no doubt about it.
Again the problem here is one of transitions.
You can't just cut spending -- raise cash taxes that quickly that rapidly back kind of shocked -- system will create a recession type situation.
We have to faze those changes and you can't have and turn -- overnight that's the first big issue second big issue of course continues to stem from the rest of the world.
Ultimately.
We as a nation need to close our trade deficit in order to rebalance our economy get back a long -- -- friends.
If the rest of the world is sinking and it is sort of European led recession right that's a big problem for us that we have.
OK well in the end though Chris.
Housing include the when you look at a jobs picture that looks rather dismal and so many how so many jobs came out of housing for.
High school educated males in this nation if -- that doesn't come back with any kind of -- the likes of which we saw back in 200456.
Two -- just stands have a new normal that's really pretty depressing.
Well I activities keep my -- housing is slowly coming back were overcome in the tyranny of the inventory net that's the good news.
But I think ultimately the housing market can never go back to 040506.
Because it was overbuilding.
Well we in the nation have to face is -- fact that -- scope people are having a very very tough.
Time making a living in this economy we have to worry about those people but this is a social problem not an economic problem.
You don't hear this -- fiscal stimulus or quantitative easing you have to have a social made its safety net to help the people get retrained so they can find a good job.
Good to see Chris thank you very much I bet that -- -- -- pointing out election -- that's Chris Thornburg is beacon economics.
