MNI 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

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