'This Week' Roundtable: Economic Outlook

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especially the Republican side, to pass the debt limit, don't trifle

with it and certainly don't trifle with default. And I think that's

significant

HOLTZ-EAKIN: And the last thing I'd say -- and this is important to

recognize -- that nine out of 10 Americans oppose just a pure increase

in the debt limit.

So let's face it. This is a political exercise. They can't just

raise the debt limit. That's politically absolutely unacceptable. They

need to both raise it and fix the problem.

AMANPOUR: And you also heard Speaker Boehner saying that everything

is on the table except -- except taxes.

Has that battle basically, Sheila, been completely won now or

settled; it's just not going to happen?

BAIR: Well, I think that's a good question. I think probably

everything should be on the table.

I think there's a difference between tax -- raising tax rates and

tackling tax expenditures, and I think there is the potential for a very

broad bipartisan consensus on tackling, getting rid of most of these tax

expenditures which are very destroying for the economy and were -- some

of them were a driver of the crisis.

For instance, the mortgage interest deduction heavily subsidized

leverage, a lot of leverage with home borrowers. He favorable treatment

we give debt over equity financing also encouraged leverage with

financial institutions.

There's a tremendous amount of potential revenue that could be

raised through tackling tax expenditures and it seems to me where the

most likely place for a bipartisan consensus is. But tax revenues do

need to go up. I think that needs to be part of the solution.

AMANPOUR: And this week, President Obama said to the Democrats,

don't draw any lines in the sand; be flexible on this.

KRUGMAN: Well...

AMANPOUR: On not particularly this issue, but in general.

KRUGMAN: Yeah, and there's a problem because, if you're playing the

responsible adult in the room and the other guy is willing to blow up

the room if he doesn't get exactly what he wants, that puts you in a bad

negotiating position.

I think there has to be some lines in the sand. There have to be --

you know, we're not going to dismantle the New Deal and the Great

Society in a couple of weeks because the Republicans refuse to raise the

debt limit.

AMANPOUR: What would each one -- I want to go around the table and

ask you, what would each of you want to see coming out of these debt

ceiling talks that are going on right now?

What is the best-case scenario?

ALTMAN: Well, I think it will have to be, as Doug said, a serious

agreement to cut the deficit, or a downpayment, as the administration is

talking about, negotiated beforehand, and then pass the debt limit

increase in effect in exchange for that.

So there will have to be a serious budget agreement. It will just

be a downpayment. It won't solve the entire $4 trillion 10-year

problem. But if it's not serious and pretty large, then I don't think

it will get the votes to pass the debt limit.

BAIR: I guess I would like to see even more than that and have a

long-term plan. Four trillion over 10 years, I think, was a good

number. I think the Bowles-Simpson plan wasn't perfect, but it was a

good -- a good framework, a good example of how the pain could be evenly

distributed.

But I agree, some short-term downpayment and some meaningful time

sequencing to get this done, I think, is necessary for credibility.

KRUGMAN: I actually -- I think it may be necessary to take this up

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