Economists Want to Cut Deficit with Higher Taxes

Kimberly Watson, Editor in Chief
March 28, 2012 /

Reports from New York show that economists believe that a combination of higher taxes and lower spending would be the right way for reducing the federal budget deficit.

Monday saw the National Association for Business Economists release a survey that forecast short-term interest rates remaining static for at least another year.

Indications are that the Federal Reserve should not buy more bonds designed to stimulate the economy as in the last few years, although it is generally accepted that the policy has proven effective. The Federal Reserve started buying Treasury Bonds in the recession. This was in answer to the 2008 financial crisis, with the option to lower long-term interest rates to encourage economy growth.

The deficit is on schedule for exceeding $1 trillion for the fourth year in succession.  Reports show that the tax revenues worsened during the recession period, contributed to by job losses and a decline in corporate profits.

The NABE poll showed that 87 per cent of those polled, believed that higher taxes should be considered, but with less spending, in order to reduce the federal budget deficit.

Billionaire Warren Buffet recommended that the average tax rate for family earnings of more than $1 million be set at a minimum of 30%. There was an even split in opposition and support for the termed “Buffet rule”. Economists were also polled on topics such as the Keystone oil pipeline and the new regulations for banks, for example the Volcker rule.

Eighty three per cent of economists believed the Keystone pipeline should be built. However, the State Department, backed by President Obama rejected a proposal for the pipeline to carry tar sands oil from Canada to Texas refineries. This project was opposed by environmentalists while its supporters believed it should go ahead, as over 1,000 jobs would be created.

In an NABE survey two-thirds of economists felt banks should not trade with their own money for betting on financial markets. The Volcker rule, named after the former Federal Reserve Chairman, was introduced to attempt restricting banks from risk trading.


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