Tags: feldstein | fed | rate | cuts

Feldstein: Long, Damaging U.S. Downturn

By    |   Monday, 06 Apr 2009 12:25 PM

The economy is headed for a "very long and very damaging economic downturn" that will not see any recovery in 2009 according to Harvard economist Martin Feldstein.

"I think monetary policy is not working because the credit markets are dysfunctional," Feldstein told CNBC.

"The Fed is being helpful by providing credit and stepping into the commercial paper market, but that doesn't really make credit available through normal channels to responsible borrowers."

Feldstein expects that we’re experiencing a temporary technical upturn courtesy of the Obama administration’s economic stimuli, but adds that the economic stimulus package really isn’t very effective.

“I think the way the stimulus package was put together was very rushed — much too much responsibility to the Congress, too little guidance,” he says.

“It will raise the level of GDP a little bit, and that will look like an increase in the growth rate, but nothing fundamental will have changed.”

Feldstein also thinks that, if enacted, the proposed limits on tax deductions for high-income individuals will effectively tax the charities themselves because the level of donations will decrease, thus shifting money from charities to the government itself.

The U.S. Senate is considering SB 6147, which proposes to tax high-income earners at a rate of 1 percent a year.

The tax would apply to incomes above $500,000 for individuals, $750,000 for a single head of household and $1 million for a married couple or surviving spouse filing a joint return.

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The economy is headed for a "very long and very damaging economic downturn" that will not see any recovery in 2009 according to Harvard economist Martin Feldstein."I think monetary policy is not working because the credit markets are dysfunctional," Feldstein told CNBC."The...
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2009-25-06
Monday, 06 Apr 2009 12:25 PM
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