GO
Loading...

Grow Out of the Deficit: Lazear’s WSJ Op-ed Piece — By the Numbers

Tuesday, 28 Sep 2010 | 12:03 PM ET

Edward Lazear, chairman of the President's Council of Economic Advisers under president George W. Bush and a current Stanford professor, has written a piece for the Wall Street Journal advocating a solution to our current fiscal woes that does not involve tax increases.

Taxes
Lars Klove | The Image Bank | Getty Images
Taxes

His solution, in two steps: 1) cut spending increases implemented since 2008; and 2) constrain future spending by implementing cost constraints indexed to inflation.

We look at some of his numbers:

• If President Obama meets his target of cutting the deficit to 4% of GDP by 2013, debt to GDP will still be at 70%, nearly double its Bush administration levels.

• If spending was held just below 20% — as it was during the Clinton and Bush administrations – tax hikes, in Lazear’s view, would be unnecessary.

• Lazear recommends congress should increase spending by the last three year’s inflation rate minus 1%, in any year where the ratio of government spending to GDP tops 18%, which is the 30-year average of tax revenues.

• Such a plan could return The U.S. to 2008 ratios by fiscal 2014, with an additional 3-4 years until a balanced budget was achieved.

• In the event of an emergency, a provision would be included so that congress could suspend the spending constraint rule for one year if it achieved a 60% supermajority.

Questions? Comments? Email us atNetNet@cnbc.com

Follow NetNet on Twitter @ twitter.com/CNBCnetnet

Facebook us @ www.facebook.com/NetNetCNBC

Featured

NetNet TV

Wall Street