If Congress and President Barack Obama fail to continue the Bush administration’s tax cuts, you can wave goodbye to the economic recovery, says Richard Rahn, senior fellow at the Cato Institute.
“I’ve been forecasting a double-dip recession if those tax cuts aren’t renewed,” Rahn told Newsmax.TV.
“The administration and Democrats in Congress are talking about renewing some of them, but not all.”
Video — Rahn: Double-Dip Recession Coming if Bush Tax Cuts Lapse
The top income tax rate is slated to rise to 39.6 percent from 35 percent currently. Obama also has proposed hefty increases and dividend and capital gains taxes, both of which already will increase as part of the new healthcare law.
Raising taxes on capital is the wrong way to go, says Rahn, a former chief economist of the U.S. Chamber of Commerce.
“That’s a backward way of approaching the problem,” he said, creating uncertainty for businesses and individuals alike.
“All this uncertainty slows growth. A big increase in marginal tax rates will discourage people from work, savings and investment.”
As for the massive budget deficit, the problem is excessive government spending rather than taxes, Rahn maintains.
“In the last two years, the government is growing faster than the private sector,” he notes.
“You can’t cure that kind of problem with tax increases. No matter how much you increase taxes, you slow growth even more and the deficit will get worse.”
Government spending cuts are the solution, Rahn says.
He’s appalled that Congressional leaders have no plans to pass a budget this year.
“That’s a fundamental requirement in the Constitution,” Rahn explains. “This is the first year in memory they aren’t passing a budget. That’s absurd.”
One congressman that does impress Rahn is Rep. Paul Ryan, R-Wis., for showing intelligence and courage on the budget.
Rahn recommends reading Ryan’s road map for economic recovery on Ryan’s website.
“He laid out what kind of spend reductions we’ll need to put us on a path to fiscal sanity,” Rahn said. “He’s not afraid to take on entitlements.”
One thing that Rahn finds disappointing: “Many conservative Republicans who say they’re all for controlling spending have failed to sign on to Paul Ryan’s road map.”
Rahn has harsh words for the financial regulation bill passed by the Senate, especially because it favors big banks over smaller ones.
“This is foolishness. It’s really economic fascism. It’s grossly unfair and counterproductive.”
Rahn also is upset that the bill increases some of the Federal Reserve’s regulatory authority.
“Many of us think the Fed should have been cut back if not abolished a long time ago, because it’s been counterproductive. The Dodd (Senate) bill would only make matters worse.”
Video — Rahn: Double-Dip Recession Coming if Bush Tax Cuts Lapse
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