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Doug Holtz-Eakin, American Action Forum president and former CBO director, weighs in on the fate of the fiscal cliff talks, and Ben Bernanke’s speec...
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With all the talk of the looming fiscal -- you would think congress would be hard at work in DC negotiating a deal -- -- -- -- on Thanksgiving recess.
It's not like our country is facing a financial disaster or anything oh wait we really are joining me -- Doug Holtz -- president of the American action forum.
And former CBO director under president George W.
Bush that's always a pleasure to have the -- -- here.
You know today the Federal Reserve Chairman Ben Bernanke warned congress said look.
I can't help you out if you go over the fiscal -- there's nothing the Federal Reserve can really do at this point.
Do you think congress realizes understands.
The stakes here.
I hope they do Jeremy you know this is a clear and present danger to the US economy and it's not just what happens if we go over the fiscal cliff it's actually affecting the economy right now it's it's a big -- and business confidence.
Businesses were already not doing very well aware of negative invests in the third quarter we really can't afford to make situation -- -- We have heard is heard some members of congress talk what going over the fiscal cliff to teach the other party a lesson that's that's not helpful this is something that should be settled settled quickly.
And we know the playbook we know that.
We're probably has a higher taxes out of the Health Care Reform we know that the payroll tax holiday is probably gonna go away that's a puts a premium on not raising any more taxes in the near term.
Dealing with the spending -- getting -- next year without imposing or a recession on the American public he.
Taking a lot of time to analyze what happens in this country what happens to this economy if we do go over the cliff.
-- is -- a big recession is it'd deep recession what happened.
I think it is a deep recession I think it's not you hear talk that.
Oh it's it's not a cliff it's a slope we can go over and yet we can fix and -- come back.
I think that's all wrong we know the -- -- large this is a 395 billion dollar tax increase.
140 billion -- spending cut its almost three and a half percent of GDP.
But more importantly financial markets would be shocked at -- failure to reach a deal and the fact that the political system is so bad the United States.
That kind of confidence is not recovered you don't reverse that.
We sought in 200811.
Financial markets go -- the real economy gets dragged down -- we can't risk that at this point.
Well -- -- this week.
In the market moving -- just this issue and it happens over and over again now I would say though that used to measure moved enough.
Because I we sit here here's some what's at stake Obama care tax hikes they're not income tax hikes their taxes on investment.
And the taxes are dramatic and won't dramatically change how people think about investing but it doesn't seem to me like anybody's really thinking about it yet.
I have been surprised at how slow this has dawned on markets -- ever -- before the election quite frankly it didn't now they seem more focused but.
I think they're missing the fact that they do have targeted investment taxes three point 8% on that investment income.
There -- fact the potential for higher income taxes.
And those tax hikes are layered on top of the pure financial market effects -- didn't have any of those tax rates.
In 2008 so this is a very dangerous combination and there's no fed to step in and help and they really are out of bullets.
You know how I don't.
You know we talk about recession.
I think you also have to talk about what happens to sort of the average American psyche if they're faced with.
Increasing income taxes dramatically so payroll taxes that go up these -- taxes across the board.
And then investing taxes where's the incentive to work weird thing and senate to invested to just get up off the couch.
These are but dramatically anti growth policies at a time when -- grow capacity at a premium we're going exactly the wrong direction -- for the fiscal cliff.
And -- really frightening part about this if you think about it is we know we have a big debt problems we've been put on notice by the rating agencies we know we have to deal with it.
It is very unlikely that we will come to terms -- -- debt and deficit problem in a recession.
So there's a double whammy there and that now we have big near term problems and we don't solve our long term problems.
Sixteen trillion dollars and counting 50004.
Every American taxpayer.
It's pretty frightening what would you like to hear from the president.
If -- hear from him tonight because he's made it pretty clear it's my way or the highway.
What should he be telling people.
Well -- I think what he has to say expresses some urgency to get this done and -- out -- plan.
On -- the president as states both for the near term you know what is the plan to get to January 2 safely and for what do talk about big.
Bargains in salt on the debt problem he talks about a balanced plan but all of heard is the tax side.
What on the spending cuts that he would actually propose that that's something American people need here.
I want to hear about entitlement spending that's high on my last.
Doug thanks for coming on tonight it is always so good to see you please come back thank you my pleasure -- had a great Thanksgiving.
