TEXT OF INTERVIEW
SCOTT JAGOW: I know it’s not even December yet, but Newsweek’s Allan Sloan is already thinking about New Year’s resolutions for the country. Of course, being a contrarian, he’s come up with things we should NOT do next year. His list begins with Social Security.
ALLAN SLOAN: Well we shouldn’t “fix it” the way we fixed it before, which is by just raising the taxes, trimming the benefit formula and letting everything go on as it is. We now have this crazy structure where there’s a supposed Social Security trust fund with $2 trillion in it, but because there is a trust fund, everybody declared the problem solved 20 years ago and it wasn’t solved. We gotta fix it and if we’re going to keep the structure we’ve gotta actually save the surplus by putting it in mortgages or something other than treasury securities because treasury securities don’t help the government cover its own bills.
JAGOW: Alright let’s move on to Resolution No. 2: Don’t keep betting on China. Explain that one.
SLOAN: Sure. If you look at what’s going on in this country, we have amazingly low interest rates considering the size of the budget deficit and the trade deficit and a lot of that has to do with the way China is lending us cheap money. Because they’re sending us goods, they end up after a bash of stamps with treasury IOUs, and that way everybody’s happy until something changes. Either the Chinese financial system, which is not in wonderful shape, blows up or when the massed in China figure out that instead of building their own country as much as it could, the government is lending money to the United States cheap. And when that happens we don’t want to be in a position of desperately depending on Chinese financing. And for that matter the Chinese probably don’t want to be in a position of depending on the U.S.
JAGOW: OK and finally, don’t eliminate the alternative minimum tax and don’t eliminate the estate tax. Why not?
SLOAN: The problem with the AMT now is it gets people in the middle and upper middle classes and it doesn’t get the people it was originally designed for: the very-high income people who don’t pay any tax. So rather than just wiping it out, out of frustration, I think we ought to redesign it so it goes back to what it used to be. The estate tax is one of those things also, originally designed a million years ago for a handful of very, very large estates that for a variety of reasons got to be a plague for much of the middle and upper middle classes. I think what we ought to do is take the 2009 rules , which would let a married couple bequeath $7 million without estate taxes and if you just kept those rules in place, you keep a lot of the revenue form the estate tax, you would affect only a small number of estates and you’d still have something resembling economic justice,
JAGOW: Allan Sloan is the Wall Street editor for Newsweek Magazine. In Los Angeles, I’m Scott Jagow. Thanks for listening and enjoy your Monday.
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