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Manhattan Institute Senior Fellow Diana Furchtgott-Roth on the fiscal cliff negotiations.
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Obama came back to Washington to push for tax hikes -- Republicans have been resisting but with only five days ago.
Is a president being given the right advice of how badly this game of chicken could end up being for all of us if we go off the -- joining me now.
-- for -- -- she is a senior fellow at the Manhattan institute and Diana you used to work of the council of economic advisors they advised the president about what.
His actions might do to affect the economy.
What do you think they are telling.
President Obama right now about how dangerous this game of chicken is about how it could.
Potentially lead to a recession.
Well I'm sure showing him the CBO forecasts that unemployment would rise above 9% to if we went off the fiscal cliff.
And GDP growth would lose half a percentage point.
The consequences.
Very -- And the question is how to avoid that happening so it's kind of surprising to a lot of people I think to hear that he might be getting this advice from his own council of economic advisors.
Who else is advising him about what to do.
From an economic perspective.
But you see -- presidents don't listen to that economists if they did everything would be fine they listen to these political types and the political types say.
You gotta have tax hikes on the rich because.
That plays into a sudden constituency.
All you gotta fund these green energy projects because that place -- the environmentalists so let me.
There's any clear Diana for those watch you might be confused by all of the the acronyms of of the different agencies that are advising the president.
Decals of economic advisors are are pretty close to pure economists whereas there are other economists more -- The Paul Krugman type of economists were more politically oriented and it's those that group that the president is listening to right.
Now per ride as a National Economic Council that's headed by Gene Sperling there's also a lot of political types in the White House and the -- of political affairs.
They listen to a lot of goes a lot more than they do listen to the economists who the president isn't a lot more responsive this president anyway.
To his political advises that spends his economic -- well.
Even gas at the risk of contradicting himself the president a year ago all of the president was saying that we don't have to raise tax rates on anybody that we can get all the revenue we need.
Just by getting rid of the deductions going to the Simpson most evident fact let's just play some sound from him I believe it's in July 2011 play the sound -- target to reaction.
What we said was.
Give us one point two trillion in additional revenues.
Which could be accomplished without.
Hiking taxes tax rates but could simply be accomplished by eliminating loopholes.
Eliminating some deductions.
And engaging in a tax reform process that could have -- rates generally.
While broadening the base.
-- -- -- Hiking tax rates he said it specifically and later on a couple months later.
He came out what is 2012 budget in which he said the tax system.
Should be simplified it work for all Americans all Americans I emphasize -- lower individual and corporate tax rates and fewer brackets.
What changes mind.
So then he came out right after the election saying he wanted one point six trillion in tax hikes.
Over the next ten year as.
And I think his election win the kind of made him go for something big yeah.
Even though -- that meant that he couldn't get an agreement and -- possible view is he does not want an agreement with the Republicans.
He wants us to go over the fiscal cliff.
Because then the Republicans will get delayed then that will be studying from a different scenario with the lowest rate not being 10% -- 15%.
The top rate not being studied five but 40% or 42.
And then you can talk about tax cuts from that new playbook -- -- -- -- -- the irresponsibility.
Of flirting with the idea of a recession for political purposes is astounding to me I mean it not not -- it isn't -- high sounding not only does he contradict what he himself was saying a year ago.
But he's contradicting the advice as you suggest of some of his top economic advisors that we will go into recession if you introduce you this.
It is astounding but patty -- Chuck Schumer they also advise going over the fiscal cliff so that very reason they really want top tax rates to go up.
And -- focusing on rates rather than revenue we would get more revenue if we had lower rates and took away some of these deduction when you want you all access to.
Give me free -- but if we go into -- recession.
We will get far less revenue nothing kills revenue coming into the treasury like a recession we've seen that -- I think there's just no dispute about it if you wanna lose -- 10200 billion dollars.
In tax revenue you go into a recession so.
All the money that he thinks he's gonna get from rich people by hiking their tax rates is gonna be lost double lost by going in a recession.
That's exactly right that's why when Britain raised its tax rate a couple of years ago from forty to 50% they've found they got less revenue and they are going to be lowering that tax rates again in April.
Because they found it didn't -- they got less revenue.
Extraordinary Diana first product.
A pleasure to see -- thank you very much for coming again great to be with you thank you.
