One on One with Michael Boskin, Chief Economic Policy Advisor for Rudy Giuliani
Friday, November 30, 2007
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SUSIE GHARIB: What are the views of the presidential candidates on how to solve the sub-prime mess and other issues facing the U.S. economy? Tonight we hear from Rudy Giuliani's top economic advisor. Joining us now, Michael Boskin, professor of economics at Stanford University and former chairman of the White House Council of Economic Advisors. Hi, Michael. Nice to have you on the program. MICHAEL BOSKIN, CHIEF ECONOMIC POLICY ADVISOR FOR RUDY GIULIANI: Good to see you again, Susie.
GHARIB: What is Mayor Giuliani's views on this whole sub-prime thing? Is he in favor of a kind of mortgage rate freeze that the White House is proposing?
BOSKIN: Mayor Giuliani is in favor of constructive workouts, primarily in the private sector. The government certainly can help facilitate that as it appears Secretary Paulson is attempting to do. He's against bailouts for people who made bad decisions because he's concerned, appropriately, that you don't want to have a worse situation later because people come to expect the government to bail them out of bad decisions. He's very concerned, both about people who might have been misled - he certainly feels they deserve help -- but people who speculated even on second and third homes for prices to continue rising at astronomical rates, he doesn't think the government should be in the business of bailing them out. He also is very concerned, he's also very concerned that this not infect the general economy and throw the economy into a sharp downturn or even recession.
GHARIB: Let's talk a little bit about the economy because many Americans are really having a tough time these days. Their homes have dropped in value. They're paying more for gasoline and they're worried about their jobs. What does Mayor Giuliani propose to do that would turn this situation around?
BOSKIN: Mayor Giuliani has an aggressive program, pro-growth program to help the economy grow, expand incomes, create new and better jobs. In contrast to the situation right now, because we have a looming $3 trillion tax hike on the books and many of the people in the other party have proposed even more tax hikes with uncapping Social Security. Mr. Rangel, the chairman of the Ways and Means Committee has proposed a plan (INAUDIBLE) alternative minimum tax.
GHARIB: So what is Giuliani proposing?
BOSKIN: He would reduce tax rates. He would provide people with affordable and portable health care with free-market solutions by leveling the playing field on health care. He would provide them with additional means for tax-free saving. He would abolish the death tax. He would index the AMT for inflation and he thinks we ought to go about and do those things as soon as possible. If some of that gets done before the next president's inaugurated, so much the better.
GHARIB: So he's in favor of these tax cuts and I understand that he's in favor of making President Bush's tax cuts permanent. What would happen if those tax cuts were allowed to expire? What would happen to the economy?
BOSKIN: I think that would be terrible. You would be tripling the tax rates on dividends. You would be almost doubling the tax rate on capital gains. There would be very substantial increases on the tax rates on wages. All of that is in my view very dangerous. It would be very bad for capital formation, investment in America and jobs and incomes and it would affect everybody in the economy, not just people, as some people claim, at the top. I think the best thing we can do is have a strong, robust economy. That's what Mayor Giuliani is in favor of, where the private sector is producing lots of jobs and people have lots of opportunities. When there is need to provide a temporary safety net and to cushion things, then we have monetary and fiscal policies that are designed to deal with those temporary situations. But we shouldn't be in the business of having the government trying to be all things to all people and cushion every potential problem somebody might have any time there's a problem. We need to have a stable, sensible set of pro-growth tax-spending regulation and monetary policies.
GHARIB: Michael, many of the CEOs I talked to are very concerned about the United States losing its competitive edge and many American workers complain about job outsourcing. What specifically would Mayor Giuliani do to promote U.S. competitiveness and job growth?
BOSKIN: I think there are a variety of things, including his health care proposal and a variety of others, but most importantly, he believes we need to lower the corporate income tax. We have the second highest corporate income tax in the OECD -- 39 percent, 35 Federal and we add in state and local. It's the second highest among all the major economies of the world. All of them or virtually all of them have been lowering their tax rates. Their average is in the high 20s now. We need to get our corporate taxes competitive so that there is more investment and more job growth here. That's a start. There are a variety of other things.
GHARIB: I'm sorry, we're going to have to leave it there. Thank you so much for coming on the program this evening. We appreciate it.
BOSKIN: Pleasure to be with you.
GHARIB: My guest tonight, Michael Boskin, chief economic policy advisor for Rudy Giuliani.
