Monday, April 16, 2012
MIT Economist calls Ron Paul’s economic plan 'extreme'
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(GoinsReport.com) -- An MIT economist said that although all the GOP Presidential candidates economic proposals are, in his view, “equally bad,” he pointed out that Rep. Ron Paul’s (R-Texas) economic proposals to balance the budget are “extreme.”
Simon Johnson, professor at the Massachusetts institute of Technology and frequent contributor to the New York Times, made his remarks after speaking about his new book “White House Burning: The Founding Fathers, Our National Debt, And Why It Matters To You” at the Peter Institute for International Economics.
The Paul proposal rapidly cuts spending by closing five cabinet departments, including the Department of Education, and ends foreign wars and corporate subsidies, while returning most other spending to 2006 levels, thus relieving the budget of $1 trillion after Paul’s first year.
GoinsReport.com asked: “Pulling out the Ron Paul plan which would cut a trillion (dollars), including five cabinet departments would go away, is that a bad way to move forward?”
Johnson said: “Mr. Paul’s proposals are very extreme and he wants to reduce revenue. So he wants to make some extreme spending cuts and reduce revenue but he still gets debt relative to GDP 90 percent. That’s a high level of debt because he’s so keen on cutting revenue.”
Johnson was referring to results found by the Center for a Responsible Federal Budget when it produced a report in February called “Primary Numbers: The GOP candidates and the National Debt,” which analyzed the fiscal consequences of each GOP presidential candidates’ economic proposals.
In that study, Paul’s plan in the worst-case scenario, dubbed the “high-debt” scenario, would increase the debt as a share of GDP to 93 percent of the economy by 2021.
However, as Johnson later acknowledged, the debt as a share of GDP is lower in two more optimistic scenarios.
In the low-debt scenario, Paul’s plan brings the debt as a share of GDP to 67 percent of the economy. In the intermediate-debt scenario, Paul’s plan brings the debt as a share of GDP.
“In the most optimistic scenario the debt goes down closer to 80 percent,” Johnson said. “But it’s still a high level of debt relative to what we’ve had historically and what would be safe for the United States going forward.”
Johnson, when asked if wanting to balance the budget in three years was a “bad idea,” didn’t comment on whether it was a bad idea or not but instead said it was “unnecessary.”
“You have to look at exactly how the economy is doing. Because if you have a big enough boom to get the revenues going back, then it makes it much easier to balance the budget,” Johnson said.
“But I think the amount of fiscal adjustment or austerity he wants to do upfront is probably more than the economy can handle at this point. So I would be much more cautious in my approach,” he continued.
Johnson also told GoinsReport.com what he thought about the other three Republicans seeking the presidential nomination.
“Well, what I think with regards to the budget, they’re all on the side of too much cutting taxes and being careful about the debt,” Johnson said. “They claim to be fiscally conservative but they’re not conservative actually by any historical comparison. They’re rather irresponsible.”
When asked whether he thought their proposals “cut too fast, too soon,” Johnson said “absolutely.”
“Look, we undermine tax revenue for more than 30 years in this country,” Johnson said. “We’ve had a big tax revolt. We can’t afford to cut taxes at this point. We need to control spending and raise revenue. Not cut revenue.
He added that no plan sticks out to him and that they are all “equally bad.”
“I think Mr. Newt Gingrich’s plan is the worst but the others are all pretty bad,” Johnson said. “There’s not much to choose between them.”
The CFRB study that Johnson refers to contradicts the Ron Paul 2012 campaign’s claim that the Paul proposal balances the budget by year three by saying that it, nor any other candidates’ plan, balances the budget at all.
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