U.S. Should Put Growth Ahead of Deficit Cuts, Economists Say
Policy makers should focus on promoting economic growth and job creation rather than deficit reduction, a majority of respondents said in a survey by the National Association for Business Economics released today.
Three-quarters of respondents said President Barack Obama’s administration should do more to support job creation, with the leading prescription being clarity on future tax policy and regulation, the group said in a statement. A majority of respondents said none of the 2003 tax cuts should be allowed to expire at the end of the year, the survey showed.
“The near-term focus should be the promotion of economic growth,” NABE President Lynn Reaser, chief economist at Point Loma Nazarene University in San Diego, California, said in a statement. “Respondents also do not believe another stimulus package is necessary but think the various tax cuts should be extended beyond their scheduled expiration at year-end.”
The government last week released revised figures showing the economy grew at a 1.6 percent rate in the second quarter, capping recent data that prompted economists to lower their forecasts for the second half of the year. Federal Reserve Chairman Ben S. Bernanke on Aug. 27 said the central bank “will do all that it can” to ensure a continuation of the economic recovery.
Seven out of every 10 survey respondents said promoting economic growth should be the policy priority at the federal level, while 29 percent said cutting the deficit should take precedence.
The Right Policy
The NABE survey showed 39 percent of members said current fiscal policy, including the administration’s $814-billion stimulus plan, is “about right,” down from 44 percent in the prior, March survey. Thirty-seven percent said it is too stimulative, while 24 percent said it is too restrictive.
Some 54 percent of respondents were opposed to the expiration of the individual tax cuts, with 33 percent favoring expiration only for individuals making more than $200,000 or married couples making more than $250,000 a year. Sixty-two percent opposed expiration of the capital gains income-tax cuts, with 22 percent favoring partial or complete expiration only for the higher tax brackets.
A majority of the 242 respondents said monetary policy is appropriately positioned and don’t expect the Fed will alter its pledge this year to keep rates low “for an extended period.” Fifty-nine percent said monetary policy was “about right,” and 37 percent said they expected short-term rates to rise in the next 12 months.
Nine out of every 10 respondents said the financial regulation bill recently signed into law would have no effect or only a modest effect on reducing the risk of another global financial crisis. Two-thirds of respondents said they supported the recent extension of unemployment benefits.
With states making mandated cuts to services and benefits to cover budget shortfalls, 61 percent of respondents said the federal stimulus funds for states were appropriate while 58 percent were against allocating more federal funding.
More than 90 percent of respondents said Spain, Portugal, Ireland or Italy would be forced to restructure their debt or call on funding from the International Monetary Fund or other euro zone countries within the next 12 months. The survey was taken between July 30 and Aug. 10.