July 29, 2010; 9:54am ET
SV: Professor thanks for coming back to us.
PM: Nice to be with you.
SV: Now sir, I know that you want to keep all of the Bush tax cuts in place. Right? You want to keep ‘em. Make your case for that will you?
PM: This is a terrible time to increase taxes in the economy, the recovery is faltering, you know we talk about the rich, that includes a lot of small businesses, for example the luncheonette underneath your studio, that family, maybe two or three people working together have got a [IRS form] Schedule C, it generates income of more than two hundred and fifty thousand dollars. There’s one trillion dollars worth of taxable income like that from small businesses that this man is going to hike taxes on. And probably the problem is not taxes, it’s spending. This man [President Obama] spends too much! Let me tell you about that… the year before…
SV: Well hold on, hold on a second, I’m sorry professor but look, over the past ten days we’ve interviewed three prominent academics, professors and lecturers from Harvard, UCLA, and Bard College. Each and every one of them has said “We must put up taxes on the rich because we’ve got to cut the deficit.” Each and every one of them has said “We must spend another trillion dollars now to get the economy going.” You’re an academic, what do you say, now give me your point on spending. They want to spend. I guess you don’t.
PM: Well, I don’t think we should spend any more. Before the great recession in 2007, the deficit was one hundred and forty billion dollars. Our president is projecting, after the recession is over and the economy is growing at 4% per year, that the deficit will be one point four trillion dollars! What happened! The answer is: Barack Obama made a lot of spending, excluding the health care legislation, that was supposed to be stimulus, permanent. Government spending in 2012 and 2013 will be 25% of GDP according to the president’s estimates. When George Bush was president, it was 20% of GDP. He’s hiked the chunk that they want to take from you, and I don’t know what we’re getting for it. Can you see any appreciable improvement in the services your federal government provides you?
SV: I guess their argument is, and I’ve heard this argument, that had we not spent all that money then things would be a whole lot worse. What do you make of that argument?
PM: Well, the [idea] with stimulus spending, and what Barack Obama promised, something he’s always capable of walking away [from], is that it would be temporary. But he’s built these spending increases into the budget permanently, like for example his electric vehicle program which is going no place. The bottom line is, he’s built out the frontiers of government dramatically, and after the election’s over it’s not going to be just the rich. He cannot finance a government that is 25% larger as a share of GDP without putting terrible burdens on the middle class. You watch, this is the tip of the iceberg [not extending all the Bush Tax cuts], after this, it’s going to be a value added tax.
SV: Okay, oh, huh, huh... I hate to leave it there…
PM: Ah hah…
SV: But we’d better leave it right there. Professor Peter Morici, thanks for joining us again sir, always appreciated. Thank you.
PM: Take care, all the best.
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