Don't extend the George W. Bush tax cuts, David Stockman, the director ofOffice of Management and Budgetunder President Reagan, told CNBC.
"We couldn't afford those tax cuts back when they were implemented by Bush. We can't afford them now," said Stockman.
"This is $300 billion a year. I think both parties are dreaming. Our fiscal situation is far worse than they're really telling the public, and since they're unwilling to cut taxes, and since we can't keep borrowing a trillion and a half dollars year in and year out, it's time to face the music."
Meanwhile, the White House continues to cite a report from the Congressional Budget Office that maintains that extending tax cuts for the wealthy could add $700 billion to the US deficit over the next decade.
"I realize people will say this [increasing taxes for the wealthy] will slow down the recovery, but, frankly, the recovery is over. We had a small inventory bounce. That's done. The economy is now bouncing along the bottom. It's not going to get a lot better, and we don't have the luxury of time," Stockman said.
"We're borrowing money or creating deficit at a $100 billion a month. We're creating deficit, or new debt, at twice the rate of our economic growth. I don't think that's sustainable and one of these days we're going to get a huge wake-up call as the global markets finally figure this out. We can't wait for that to happen, because if we do, it will be too late."
Stockman scoffed at the idea that tax cuts creates jobs, a point made by Obama's former OMB director Peter Orzag, in a recent New York Times column.
"That's a Republican National Committee talking point. We have millions of excess small businesses in the United States that were created during the boom—construction companies, restaurants, retailers and so forth—that have no business, and they're not hiring because their taxes are too high, they're not hiring because they don't have any customers," said Stockman. He also said that there are more homebuilders than housing starts.
"We have to recognize that we're in a major debt deflation, debt liquidation. Our economy has to go through vast restructuring, and the typical historical expedience, like tax cuts for a short period stimulus, simply is irrelevant. They [tax cuts] will only make the problem larger in terms of the fiscal side and will not create jobs. We've had tax cuts for the last three years, and how many jobs have been created? Net, very few."