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Tax Cuts, Not Stimulus Plan Needed: Lawrence Lindsey

The President's economic stimulus plan is not what the country needs to generate jobs, Lawrence Linsdey, president & CEO of The Lindsey Group and former National Economic Council director, told CNBC on Friday.

"They lost sight of the ball with this proposal," he said. "This is not the right kind of stimulus that we need right now."

The President's latest economic stimulus planwould allocate $50 billion in additional transportation infrastructure spending, make the existing temporary R&D tax credit permanent, and temporarily allow businesses to deduct 100 percent of the cost of new plant and equipment investments.

"All that does is change what we call the present value, and in a zero interest rate environment, that's not really a change at all," he said. "If what you want to do is create jobs, it would seem to me that you'd want to lower the cost of labor to the cost of capital. What the two proposals did, if anything, is lower the cost of capital relative to the cost of labor."

Lindsey also said that the Obama administration's stimulus proposal last January failed to generate jobs.

"Last year's stimulus didn't work," he said. "In the past it didn't work either and I think they've really got to re-approach the way they're thinking about job creation. What we're getting is the kind of labor market performance that they thought you'd get if they didn't pass any stimulus at all."

Instead of allocating funds into state and local governments, he said, the administration should have cut the payroll tax in half for employers and employees.

"A lot of it sort of stuck to state and local budgets and it didn't make sense for creating private sector jobs," he said.

Lindsey is in favor of extending tax cuts for two years, enabling the next president and Congress to decide how to proceed.

"They [the administration] need to focus on what is actually good for the economy and put the politics on the backburner," he said.