Cato Institute's Jeffrey Miron on the Economy

It is gas card Thursday an architect of shady shady you've been pretty good time for some it. Well you know -- get seated and Dexter. Detects the word gas right now be your chance to win a twenty dollar gas card -- you'll get amendment right to accidents X 8680. Right now all right. Well our next guest I've been waiting for this all morning long his name is Jeffrey Miron from the Cato Institute Jeffrey welcomed the show are you don't aren't. They expert taken timeout the you know like I read your position paper on what needs to be done. To fix the American economy and get us back on her feet and get us to get back to an unemployment rate of. Less than 6% -- touch on some of the highlights as to what you folks have come up with. You know like overall -- -- that we should be thinking about long term growth we -- thinking about policies to help increase. The productivity economy we should not be so focused on the short run are on stimulus -- on redistribution so we need to reform our tax code we need to slow the growth of entitlements. We need to scaled back some of our excessive military interventions. And we need to think about regulation more carefully because also motivated sensible and well attention and a lot of it is -- No Jeffrey -- read the part about eliminated. Eliminating excuse me misguided tax deductions can you be specific or give us some examples. I don't think a misguided tax deduction is. Or two that are sort of the most to a problem it is the deduction. For mortgage interest homeowners who itemize get on there temporary tax returns. -- encourages people to buy more housing than they would if they weren't getting this implicit subsidies from the government and out to distortions that. Reallocate capital away from. And factually you'd expect that to just having big predicament mentions stats not sensible the economy -- second is the deduction that employers get when they pay health insurance premiums on behalf of their employees. That encourages people to buy excess amounts of health insurance. It is for example Paul -- with very low deductibles co pays because it's part of being subsidized by -- tax break and the total value all that implicit subsidy of what's. Called tax expenditures is probably about 250 billion dollars a year every year the money. But Jeff you have to acknowledge those would be very unpopular legislation points and needed to eliminate. My whole because I have a mortgage interest it is a mortgage on deducting that I count on that. And I bet they'll be devastating to the real -- market. He wouldn't. Well first of all to some degree that's the point -- over -- real estate and we need to be left invested in their houses so would you that is correct but that's. The upside the way kind of but the other thing that realizes that anything which is gonna make a significant difference to the US economy is gonna be politically incredibly difficult. There are little bits of waste fraud and abuse they're small tweaks and policies that. Most people realize -- idiotic but are still around like agricultural subsidies. They don't add up to watch tournament gonna make a difference we need to tackle entitlements we need to tackle these huge tax expenditures were excellent just. I don't disagree with you about entitlements that I think if you tell employers that they can't deduct. The cost of health insurance that also is gonna slow down the economy is to -- to your two ideas would be. It would cripple the real estate market and it would in an employer would be discouraged because they have to fire people they wouldn't be able to continue to provide people who benefit. Talk -- don't accomplished care at all I think its employees who should care the players. They don't care where they give you would all sorts of health benefits were dollars' worth of salary so we got rid of this one which is simple I think important and they don't have to really be and help. Insurance business at all. And they would just adjust how much they pay in -- company in wages to make up for the fact that they're no longer paying health insurance premium that's totally a wash for them. It's that the effect is on consumers who would now be less incentivized to choose very generous health insurance plans and therefore with. More mart health insurance they would be more cost conscious decisions about how can purchase. Well at I'm not sure we're gonna find agreement on those two but I -- -- and I think we will come to an agreement in terms of corporate taxes. I'm I'm really curious to hear your perspective corporate taxes in the United States. And Lester General Electric or 35%. What would you what is your position on corporate taxes -- Well effect of widespread. Factor among economists that corporate tax rates are probably. All it. Maybe should be as low at zero but certainly should be higher. And the corporate tax rate of our competitors and countries in Europe Japan and so we're currently -- compliant. Both state and federal tax treatment. Basically the highest of any of the developed countries. So at a minimum scaling back at 35%. A B 25 or 20% to put this sort of in the middle of the range of moderate countries. That would attract former capital the US that would be good productivity would help attract -- people to work of those factories. And it would content very little revenue because right now a lot of that activity is just not in the US at all it's going overseas and so we're not getting any tax revenue. The first. Swelling and the other thing it. I don't think we're really touched on is there's so many special interest tax breaks here right admit that's. EU take a look like how can a company like GE not pay any taxes while the -- would they drive their politicians. And and they were able to make sure that the -- they got special tax credits. Absolutely and much much better system. Have a lower rate. I would get rid of a vast majority all of us special loopholes and and we would have simply a code it would be harder for for corporations to engage in various kinds of county mismanagement and fraud. We collect a similar amount of revenue we'd end up with more corporate activity more employment more investment in the United States. All right let's talk about the entitlement programs Medicare Social Security those of the big -- right. And then all of a sudden we're pretty good shape what would you do with the -- -- what is your recommendation as a relates to social security and Medicare. So first Medicare is actually win a wave bigger problems or security they're both substantial but one it's really. Spiraling out of control as Medicare. Medics and security as -- while not an issue not the biggest issue by a bylaw. On most importantly. You have to reduce the level benefits as being paid out and there are a number of ways to do it none of which are gonna make people happy going -- earlier report about the work of deduction but. Introducing gradually higher and higher age of eligibility for Medicare facing it from current 65 over. Period of years up to seventy and 75 that would be very beneficial. Introducing much bigger co pays and deductibles -- -- most people would pay a large fraction of their health care out of pocket in most years can only be -- for catastrophic event. Which is what insurance as well exposed to be about the first placed. The alternative approach that several people have been pushing Paul reliant park all right to pushing is to basically give everybody a voucher and reluctant chopped a purely private plans to. I had a lot to recommend it to the details might be tricky so that's something to think about is not necessarily the most. Is that a certain -- deal. All right what are your thoughts on immigration you know if you bring up the topic of illegal immigration and illegal immigrants and it's. You know it's a lightning rod issue I've got about twenty million illegal aliens in the United States. So again the things that make economic sense -- are not easy politically. Economists are generally quite favorable creation because it keeps labor costs low. Clearly benefit the peoples from. Two very poor countries who were immigrating. In many instances and therefore having them a better life it's not clear what policy. It's systematically try to redistribute to people who happen to be in the US already are sort of pork to. Relative to people we're not here yet but are much much more now living in. In Mexico or America and so on. So cause it's certainly endorse guest worker program Beckett a lot more people people -- United States and it helps keep it cost -- it -- people to -- on the high skill and the distribution. Economists would would push very hard work and expansion of the H one B program which -- High skilled engineers and so on I mean here's com. Many of them have come US have been trained in the USSR college uber partially taxpayer expense you sort subsidize them they would tell mapping works attempts that's just completely -- This is the time a year where I start getting a lot of resonates in the mail from -- -- kids -- -- Korean kids that have to go hole they'd be they'd come to prep school here. They've gone to college here they've got a master's degree they want to stay in the United States they've been here for ten years many of them and we trauma we set -- -- back out -- bull. Who as you know bought into the whole American -- and everything about the united. And we say no -- -- Didn't see you later. Well I wish we had more time because I wanted to hear your thoughts on the military that perhaps we can I get -- come back some time all right Jeffrey thank you very much for your time keep. That's Jeffrey Miron from the Cato Institute joining us on the financial exchange.