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Free AccessMNI EXCLUSIVE: Ex-Fed Vice Chair Sees $1-$2T Tax Cut By Hill
--Former Fed Vice Chair Blinder: GOP Will 'Move Heaven and Earth' To Pass Cuts
--Blinder: Expects 'Messy' Fiscal Fights, But No Meltdown
--Blinder: Hopes Senate To Block 'Very Pernicious' House GOP Bill on Fed
Overhaul
By John Shaw
WASHINGTON (MNI) - Alan Blinder, a former vice chairman of the Federal
Reserve Board and one of the U.S.'s leading economists, told MNI Thursday in an
exclusive interview that he's bracing for a "messy" autumn in Congress, adding
that he expects lawmakers to avert spending and debt ceiling meltdowns and
ultimately approve "modest fiscal stimulus" through a tax cut package.
"The sausage-making in Congress will not be pretty to watch, but I think
Republicans will probably be able to avoid total disaster," he said.
"They don't have much choice. Republicans are everywhere in Washington. If
the government shuts down or there's a default, they would have no one else to
blame but themselves," he said.
Blinder said Republicans will likely cobble together legislation to fund
the government and lift the debt ceiling so they can turn to their top priority
of the fall: tax cuts.
"More than anything, Republicans want to cut taxes. They will move heaven
and earth to cut taxes. What is likely to emerge from the Hill is tax cuts
rather than anything that could reasonably be called reform," Blinder said.
"At the end of the rainbow, we'll probably get tax cuts. There is no
consensus on what reform looks like--or even what it means," Blinder said.
He added that his "back-of-the-envelope guess" is that Congress will pass a
tax cut package between $1 trillion and $2 trillion over ten years.
"This is a large tax cut, but it will fall short of (President) Trump's
boast of the largest tax cut in history. That might disappoint him," Blinder
said.
He added that he expects "plenty of posturing and arguing" within the
Republican Party over how much of the tax cut should be offset.
"There will probably be a major fight, some of it for show, some of it
genuine, about how large the tax cut should be and how much of it should be
offset by closing tax loopholes," he added.
Blinder said he expects the tax cut package to include both business and
individual tax cuts.
"It's not politically possible for Republicans to only pass corporate tax
cuts. They have to do both to prevent a political revolt," he said.
On another matter, Blinder said he is concerned about House-passed
legislation written by Republicans that would substantially alter the Fed's
operations.
"A lot of the provisions in this bill (the CHOICE Act) are extremely
pernicious and would be very harmful to the Fed. I hope this awful bill dies in
the Senate," he said.
Blinder said he is most troubled by the bill's provisions to end the Fed's
dual mandate, require the Fed to embrace a specific rule to drive its monetary
policy, and require the Fed's budget to be approved each year by Congress.
"Putting the Fed into Congress's annual appropriations process would
severely threaten the Fed's independence," Blinder said.
Blinder is current a professor at Princeton University and a visiting
fellow at the Brookings Institution.
--MNI Washington Bureau; tel: +1 202-371-2121; email: john.shaw@marketnews.com
[TOPICS: M$U$$$,MC$$$$,MT$$$$,MX$$$$,MFU$$$,MGU$$$]
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.