A look at tax cuts, entitlements

Julia Coronado


BILL RADKE: Let's say good morning to Julia Coronado, chief economist for North America at BNP Paribas in New York. Hi Julia.

JULIA CORONADO: Good morning.

RADKE: So Congress is debating these Bush tax cuts, whether to extend them. Julia, I saw a poll today showing most Americans think increasing taxes on anyone right now, including the top earners, would slow this economy and kill jobs. How true is that?

CORONADO: I think it's definitely true that we're at a very fragile point in the recovery. The recovery is slow. We're at a fairly weak pace of growth and if you raise taxes on anybody that will -- to some greater or lesser degree -- slow growth further. So in the short term, I think it's clearly a good idea to forestall that kind of weight on that economy and over the longer term, I don't think anybody would argue that taxes need to be part of resolving the deficit problems we are facing. But we've also got to cut things on the spending side, too. We've got entitlement reform that's long overdue.

RADKE: Well, this is what I don't get then, Julia -- Cutting entitlements takes money out of people's pockets, just like raising taxes does. Wouldn't they have the same effect on the economy?

CORONADO: Well what we're dealing with is a demographic transition in our country, in our society, where we've made a lot of promises -- benefits that people receive in retirement -- that we just can't afford. And if you actually adjust people's expectations and behavior so that they stay in the labor force longer and remain productive economically for longer, that can actually be positive for the potential growth rate of the country. That keeps them working longer and that's good for the economy.

RADKE: Julia Coronado, chief economist for North America at BNP Paribas, thank you.

CORONADO: My pleasure.


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