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Art Laffer: US ‘Close’ to Double-Dip Recession

Monday, 9 Jul 2012 | 9:08 PM ET

The U.S. economy is near a double-dip recession, economist Art Laffer said Monday on CNBC.

“We’re close — the single worst recovery of all time,” he said on “The Kudlow Report.” “If the tax increases go through to 2013, I think we fall off the cliff to be very honest with you.”

Vice President Joe Biden’s former chief economist, Jared Bernstein, had said that keeping the Bush tax cuts only for the middle class would only mean higher taxes for the top 2 percent of earners.

Not true, argued Laffer of Laffer Associates.

“They employ everyone else, invest capital and provide the economic recovery,” he said. “It’s just terrible.”

Bernstein said he supported a tax cut for the vast majority of Americans.

“I started out earlier saying we all agree the bulk of the tax cuts affecting the bottom 98 percent ought to be extended,” he said. “Why don’t we start there tomorrow? You want a tax cut, that’s the one to go with.”

Bernstein cited numbers from the Congressional Budget Office that showed expiring the Bush-era tax cuts for just the top 2 percent would raise an estimated $850 billion over the next decade.

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“We are talking about raising real money for deficit reduction. That’s important for the economy, too,” he said. “If you think back to the years when we had the higher tax rate, we had more balance. I think going from 36 to 39 or even 40 plus is absolutely fine in terms of balancing our revenue and growth needs. It’s that simple.”

Laffer disagreed.

“Let me say, No. 1, you’re not going to raise the revenues,” he said, referring to British Prime Minister David Cameron’s attempt to raise top tax rates to 50 percent. “Two years later they have gone into a double-dip recession. It just doesn’t work. You don’t get the money.

“No. 2, Bill Clinton cut government spending as a share of GDP by more than the next four best presidents combined. If you got this president to do it, you might get a good economy. You have new taxes coming that are huge. You will cause a tragedy of incredible proportions in 2013 if you don’t get off this kick.”

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  • Lawrence Kudlow is a CNBC senior contributor. Previously, Kudlow was anchor of CNBC's prime-time program "The Kudlow Report"