feldstein is saying. what do you say? >> well, look, i think there's pretty wide agreement that the payroll tax cut for the workers is at a moment like this... could be an important demand effect. i think there's differing views. i would like to think that if you address the cost of labor and you sort of reduce the after-tax cost of hiring people, i think the amount of billions that it adds up to will make a difference to some companies. i think it tends to perhaps be a bigger impact on smaller businesses than on big ones. and then another part in the jobs bill is continuing and expanding tax incentives for companies to do investment. i think those three things are what you want to do. you don't want to just pick one because what your view of the world might not be correct. you want to try cutting taxes for hiring people, cutting taxes to put in people's pockets, cutting taxes for investment, and try to do that as a package. i think it could be pretty positive. >> woodruff: martin feldstein, what if you put them altogethe

feldstein? >> i would split the revenue between the two uses, and i thought that the bowles-simpson proposal which does do that probably puts too much into deficit reduction -- sorry, into rate reduction, into rate reduction and not enough into deficit reduction. i think we do have to get back to annually balanced budgets, not every year, but over the business cycle as quickly as possible. here's the good news, after world war ii, we had a debt to gdp ratio of 110%. in 15 years later it was down under 50%. and that happened because over those 15 years, on average, there was no deficit. some years plus, some years minus. but the fact that the economy grew 2.5, 3% and we had inflation 2.5, 3% meant that nominal gdp kept growing while the total debt remained unchanged. and so we got back from this very high debt to gdp ratio to something that we then lived with for several decades until recently. >> thank you. governor engler. >> i was going to mention simpson-bowles in terms of the structure but f

feldstein left off.edentials as a three-term governor, we got michigan back to a triple-a rated state. i appreciate the challenge in front of the committee. my testimony today focuses on the critical relationship among business tax reform, economic growth, and deficit reduction. business tax reform should be designed to maximize economic growth over time, while creating permanent jobs with good wages. we believe the congressional action can improve the ability of american workers to compete in the hyper competitive world economy. such actions to sustain economic growth would have the additional benefit of reducing the burden the nation's current debt imposes on our economy. if sound corporate tax reform along with other reforms, including broad regulatory reforms, improves economic growth by even half a percentage point, we can generate new jobs for millions of americans. you and the committee could not be holding a more timely hearing than today's session. our companies are disadvantaged today by a u.s.

feldstein, what do you recommend that we do with the bush tax cuts? >> tell me what the economy is going to be like, i'm afraid the economy is going to be very weak. and, therefore, when i think about deficit reduction and reform, i think that we have to do the timing such that we don't take a weak economy and push it down even more. i think there's, unfortunately, contrary to a lot of the both private and public official forecasts, i think that there's a 50% or better chance that we're going to go into a new recession. i think consumers and businesses are not under current circumstances inclined to spend. and so i'm afraid that if that's where we are, it would be a mistake to let those tax cuts lapse. >> anybody on the panel, i would like you to opine on this -- do you have any favorites among the tax expenditures that you would like to get rid of? that you particularly think are a drag on the economy? and that -- where we can get the most effect in helping not only the deficit situation but the overall economy by eliminating that particular tax expe

feldstein made in his earlier comment. not all tax increases are the same. some tax increases are spending cuts. that is the whole point of this tax expenditure discussing. yes, we need to cut spending, but through eliminating tax expenditures and as dr. feldstein said, just an accident of accounting that we call that a tax increase. the personal itemized deduction will not change the behavior in the same way that raising marginal rates will. i keep coming back to the idea that for better and worse, and i am sympathetic to the charitable deduction, but they need to be eliminated as a way with doing the least amount of damage to economic incentives to raise their revenue sufficient to support the spending path that we are already embarked on. >> chairman greenspan. >> one issue needs to be addressed on the whole question of tax expenditures. following that 1986 tax legislation, it was very discouraging because i recall elaborate discussions with respect to bringing the marginal -- expand the base and bring marginal tax rates down. and that was achieved in the

what professor feldstein proposed is a cap based on adjusted gross income. as your gross income goes up, the cap actually goes up, and so if the cap were binding on some taxpayers, the affect the proposal would be to i earn an additional $100, well that will increase my allowable deductions by whatever the percentage cap is so i may increase deductions a little bit which means my taxable income goes up by $100 or if the cap is binding slightly less at $100 leaving the marginal tax rate either unchanged or in some cases will reduce it. now, i, too, read the "wall street journal" op-ed piece by professor feldstein, and we have state income taxes deductibility and the state income taxes are generally at a rate above 2%, so the state income tax would generally go up, and increase your itemized deductions meaning it's a wash. you would not get the reduced marginal rate effect, but you would be held -- >> at the federal level, there could be a reduction. >> not if you're in a state -- >> and i would -- >> you would never increase the marginal rate. it would only h

people like martin feldstein who was president reagan's chief economist have said that some of the most wasteful and unproductive spending anywhere in the budget is actually in the tax code. those are a number of things that obama is talking about. i'd also note that when you do the math and you include as one should the spending cuts that were just enacted last month in all of the non-entitlement programs, when you take the numbers, you remove the war spending-- i agree with phil there-- and you use the same budget baseline, the same measuring rod that both simpson and the gang of six today, you'll actually find the obama package is more than $2 in spending cuts for every dollar in revenue. >> ifill: does your math equal that? >> bob and i need to open up a spreadsheet after the show and do the math. there's going to be a mix of politics and policy. you know, for me it's fine actually for the president to put out his vision and give the kind of angry speech. that's fine. everyone should just understand last week was policy. this week is politics. hopefully those two can merge and both

host: to hear a voice on the other side, let's listen to the economist martin feldstein. >> it uses the revenue to finance a new collection of government spending programs, when we need that revenue from reduced tax expenditures to reduce future budget deficits and to lower marginal tax rates. second, as you know, the president would limit the tax expenditure reductions just to hire income taxpayers, those with more than $200,000 in income. but a long-term deficit reduction requires that everyone shared in that burden. if congress were to pass the president that a proposal to reduce tax expenditures just for higher income individuals, i think it would be very difficult to revisit that at a later time and to extend it to the entire population of tax payers. host: two voices in the continuing debate over tax policy. we have two at the table this morning. we are taking your telephone calls on tax policies, specifically using the president's proposals in his jobs plan at our vehicle for discussion. a viewer from new york says -- replacing the income tax with a consumption tax? guest: it wou

off >> host: and a voice on the other side, let's listen tosten economist martin feldstein. t >> it uses the revenue todstein ew collection of government spending programs. when we need that revenue fromed reduced tax expenditures to reduce future budget deficits fe and to lower marginal tax rates. second, as you know, the president would limit the taxhe expenditure reductions just tout higher income taxpayers, those with more than $200,000 in

and i think on the tax expenditures feldstein talked a great deal about the senate finance subcommittee. and i think simpson/bowles was clever and not a god not just the business tax rates, but they got individual rates. i mean, everybody can say g, i'd certainly like, while we're at it on the business taxation approved territoriality and the way that would work in a competitive way. but if i had to start with a physician were simpson/bowles that leave me with a much lower rate, i want to be in the conversation. and it's the difficulty because if you do with individual rates, often on corporate business organization get treated appropriately. i mean, this should not have as much to be concerned about. so that to me would be very interesting. at sight to see them go on top of that. but the other thing that is interesting about the committee. we haven't said too much about it, but it is a legislative business. my assumption is that congress put it on the desk, no matter what gets sent somewhere out, something passes the congress, it's going to be fine. i mean, i think it would be unbeliev

think on the tax expenditures i have the privilege of being with the chairman greenspan and marty feldstein and john taylor talked a great deal to the senate finance subcommittee. and i think simps and bowles got an individual rates and everybody could say, well, gee, i'd certainly like -- while we're at it on the business taxation improve territoriality and make it work in a competitive way and if i have to start with a position where i have a much lower rate i sort of want to be in that conversation so i think there's -- and it's that difficulty because if you deal with all the individual rates then all the noncorporate business organizations structures get treated promote. i mean, they should not have as much to be concerned about. so that's -- that to me would be very interesting. i would like to see them go plus on top of that. but the other thing that's interesting about the committee we haven't said too much about this but it really is a legislative process. but my assumption is that if congress puts it on the desk, no matter what it gets said somewhere else in town, if something pas

i think that on tax expenditures, marty feldstein and john taylor, the senate finance subcommittees,clever in that they got not just business rates, but that ty

martin feldstein served as chairman of the white house advises.of economic counci he has written morein the field of economics, founded the national bureau of economic research, and is currently a professor at harvard. john engler president of the business roundtable, a three- term governor of michigan. mr. engler, i governor engler was president and ceo of the national association of manufacturers. and edward kleinbard, chief of staff of the joint committee of taxation from 2007-2009. he has 20 years of experience practicing tax law in new york and is currently a professor of law at the university of southern california. an extraordinary panel. thank you for honoring us with your presence. senator crapo. >> if thank you mr. chairman. i appreciate your opening as well. i want to focus on one of your earlier comments. any part of the important needed changes that we need to make in america today with regard to our economic and fiscal policy, tax reform is one of the keys that we must not allow to be ignored. i have been working with a group of six, it has been called the game. -- gang.

host: to hear a voice on the other side, let's listen to the economist martin feldstein. >> it uses the revenue to finance a new collection of government spending programs, when we need that revenue from reduced tax expenditures to reduce future budget deficits and to lower marginal tax rates. second, as you know, the president would limit the tax expenditure reductions just to hire income taxpayers, those with more than $200,000 in income. but a long-term deficit reduction requires that everyone shared in that burden. if congress were to pass the president that a proposal to reduce tax expenditures just for higher income individuals, i think it would be very difficult to revisit that at a later time and to extend it to the entire population of tax payers. host: two voices in the continuing debate over tax policy. we have two at the table this morning. we are taking your telephone calls on tax policies, specifically using the president's proposals in his jobs plan at our vehicle for discussion. a viewer from new york says -- replacing the income tax with a consumption tax? guest: it wou