To Cut Or Spend to Save Our Economy?
CHRISTINE ROMANS, CNN HOST: Welcome to YOUR MONEY. I'm Christine Romans. My friend Ali Velshi is off today. The question to cut or spend to save our economy. So many of you out there feel we must get control of our deficits. But what are you willing to give up to get there? How about those Bush tax cuts? They expire in just six months. Chrystia Freeland is global editor at large, Reuters. CNN chief political correspondent Candy Crowley is host of "STATE OF THE UNION" here on CNN. She talks about the head of the State of the Union. But let's start with Stephen Moore, editorial writer for the "Wall Street Journal." Will President Obama turn the Bush tax cuts Stephen into the Obama tax cuts?</s>STEPHEN MOORE, EDITORIAL WRITER, "WALL STREET JOURNAL: " Well I would like to see that. I'd like to see some tax cuts from this administration. But the big issue right now is what's going to happen on January 1st of 2011which is that all of the Bush tax cuts are scheduled to expire the middle class tax cuts and the investment tax cuts. And my own feeling is that it's really in this kind of environment where we have such a risk of a double dip recession, I think it's just economic poison to be talking about raising tax rates on investments and businesses at this time when we've got such high unemployment all over the country.</s>ROMANS: Chrystia they're expensive. Those -- that tax structure is expensive, isn't it?</s>CHRYSTIA FREELAND, GLOBAL EDITOR AT LARGE, REUTERS: The tax cuts for sure. I would actually like to come back to Stephen if I may with a question. Does your concern about a double dip recession mean you're in favor of stimulus now?</s>MOORE: No, look, I think the lesson we've learned over the last ...</s>FREELAND: So we don't tax, but we also don't stimulate, it's like that classic Bush philosophy of don't tax but don't do anything on the spending side and have big deficits going into a financial crisis which has positioned the U.S. so well?</s>MOORE: I guess my view is we've just had this experiment in spending stimulus. The biggest experiment in American history with $800 billion spent. And it was that we all now know that it has been a failure. It didn't create jobs.</s>FREELAND: That's completely untrue. We don't know that at all. It didn't create -- it wasn't big enough to -- it wasn't big enough to end the recession, but we don't know the -- imagine had we not had that stimulus, don't you think the economy would have been even worse?</s>MOORE: No I think we'd be much better off today if we hadn't done the spending. All we've got in exchange ...</s>FREELAND: Seriously?</s>MOORE: Yes, the spending just created a much larger gap and it's basically I think made businesses in a hungered down environment. We know what works. If you look at the book that I wrote, the history of the last 40 years shows that when we cut tax rates that's when the economy grows. It grew in the 1960s when Kennedy cut taxes and ...</s>FREELAND: It grew during the Clinton era, as well.</s>MOORE: Don't forget that Bill Clinton cut the capital gains tax rate. Barack Obama is talking about raising it.</s>ROMANS: Candy lets bring it back to you because we're having a very ideological discussion here. This is what you'll be hearing when we come back this fall. We should be spend, spend, spending to keep the economy going. This is not the time to be taking our foot off the gas, no, no. We need to be spending the Bush tax cuts and cutting taxes so we can keep this money flowing that way. Candy how is this going to play politically?</s>CANDY CROWLEY, CNN CHIEF POLITICAL CORRESPONDENT: Let me just make a prediction, I don't think you'll hear a lot of we need to spend some more money. That is sort of a no-go on Capitol Hill. It's not something they want to talk about. Perhaps they will prime the pump some more, but I don't see that as a selling point in terms of the election. What is more of a selling point really what Chrystia sort of got to, which is the way that the president is going about it is you'd have been so much worse off if we hadn't done that stimulus. So it's more going that way. I also don't expect you're going to hear a lot of talk about rolling back those tax cuts. I think in the end they'll come up with some formulation which will basically be don't worry, middle class American will be able to retain their tax cuts and I think that gets to Stephen's point which is they probably will roll back on the wealthy.</s>ROMANS: And people who make $250,000 or maybe some have even lower that had number to maybe $200,000 and more will lose their tax cuts. I want to look at projected federal revenue spending by the year 2020. Because this is why we're talking about there is no appetite to spend more money because when you look at Medicare, Social Security, the interest on the money we've already borrowed and spent but haven't paid for, you're talking about 93 cents of every incoming federal dollar by the year 2020 will already be spoken for by those things. That leaves that little sliver on the right to do everything else with the entire United States government. By 2030, I think interest on your debt alone is something like 8 percent which is the largest single expenditure in the government. So Candy, just bringing it back to you again, this is the difficulty for the president. People -- he needs to spend money now, his supporters say, to keep things going, but with an eye to a number like that so that you're not burdening your grandchild. It's a very difficult line to walk.</s>CROWLEY: Exactly and certainly that's pretty much what you're getting is you will hear him talk about we need more jobs bill so-to- spend more money, basically teachers, firemen getting laid off, and we need that money, but we've got to be careful, we have to watch the deficit. So he tries to do due diligence to both, but in the whole political scheme of things, Republicans are betting take that looming deficit is something that Americans totally get. It's like unemployment. The minute you say the unemployment figure people understand what that means. They also understand the word deficit. So you can talk about first quarters and second quarters and GDP and the trade balance, but if you say we're spending x amount of dollars over what we're taking in, people sort of intrinsically know that's a bad thing. And that's what Republicans are banking on.</s>FREELAND: I would like to agree with Candy on the politics of deficit, but I just want to cast a little bit of doubt on those forward projections that Christine was talking about at the beginning. And I think Stephen is actually going agree with me on this one, that it's incredibly hard to know how debt and deficit looks 10, 20 years into the future because it all depends on the size of the economy. So really the central question, we're talking about sort of stimulus versus deficits, do you want to tax more, do you want to spend more. The real center issue is how do you get the economy to grow. And a half a percent or an extra percent a year of economic growth solves a heck of a lot of problems. And that really I think needs to be the central question of the debate.</s>ROMANS: But not all of them. You can have the economy growing robustly, Stephen, and then suddenly you turn that whole situation upside down. No matter what, don't you have to have either cutting spending or raising taxes or some combination of both, can the economy on its own fix this problem?</s>MOORE: Well first of all, I agree entirely that the first thing we have to do is get this economy growing. And that's why I just think it really is such economic insanity to be talking about raising tax rates on capital investment. What we need in this country is investment in the country from foreigners around the world. They're not going to invest here if our tax rates are going up when the rest of the worlds are going down. If you put an extra percentage point on growth over the next ten years, it's like adding a Germany to the U.S. economy. That's how big the economy grows. And you solve a lot of problems that way.</s>ROMANS: It is the biggest most dynamic economy in the world. Something to remember and we have counted out economic growth being a help or a tail wind before and if the '90s, for example. And it did come running back.</s>MOORE: That's right.</s>ROMANS: Everyone sit tight. One Nobel Prize winning economist saying we're on a familiar road. One that leads to the dreaded d word, a harsh reality check, some of the scary language of the week next.