Going over the fiscal cliff may not be such a bad thing after all, former Democratic National Committee chairman Howard Dean claimed on Thursday.
He said ending the Bush-era tax breaks at the same time that $1.1 trillion is cut from the budget could be for the best in the long-term.
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“We will get a lot more deficit reduction if we do the fiscal cliff,” the former Vermont governor said on MSNBC’s Morning Joe. “I actually think the markets will reward the fiscal cliff over a period.
“There will be some panic and some moaning and groaning, but the fiscal cliff is not a real cliff, it’s a slope, and you are going to get the biggest bang for the buck in terms of deficit reduction.”
Dean, who ran for the White House in 2004, said the economy will be able to withstand the effects of the cliff. “Yes we will go into two quarters of recession,” he said.
“But we are in deep trouble here, somebody’s going to have to pay the bill and it is going to have to be all of us and you get a much better tax bang if you go back to Bill Clinton’s tax rates.”
Despite his views, Dean said he believed the two parties in Washington will reach a deal to avoid the cliff.
“But the deal has to be the right deal,” he said. “And I still believe that it’s safer, if you’re on the progressive end of the political spectrum, to go over the fiscal cliff than it is to agree to some of the things they’re talking about.”
Dean said one of the advantages of going over the cliff would be that there would be some cuts in defense spending, which would not happen otherwise because “defense contractors are in practically every Congressional district.”
He also said there would have to be be some “cuts in human services,” which he didn’t like, but he accepted that “everyone is going to have to put something on the table here.”
Dean was adamant that one thing that should not be on the table is a raise in the age of Medicare entitlement as that would make it virtually impossible for people aged 65 to 67 to get affordable health insurance, but he said he had no objection to raising the retirement age when it came to social security.
And he said the other situation that must not be allowed to come to pass is an increase in tax rates now, with a promise of cuts to come. “This has to be a comprehensive package with spending cuts now — including entitlement cuts.”
Dean claimed that marginal tax rates have little to do with investment. “If you go up to 70 percent, yeah, you’re talking some serious stuff that has something to do with investment, but what we’re talking about is a relatively minor adjustment from 35 percent to 39.6.”
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