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Economists' Advice For Obama: Avoid 'fiscal Cliff'


WASHINGTON (AP) â¿¿ So what's the first thing you'd do for the economy if you were president?

The Associated Press posed that question to more than a dozen leading economists. Asked to name the one step they'd push most urgently if they were the newly re-elected President Barack Obama, the economists sounded a few common themes:

Reduce the budget deficit. Cut tax rates. Do both, somehow.

Above all: Sidestep the "fiscal cliff." That's the package of tax increases and deep spending cuts that will take effect in January unless Congress reaches a budget deal by then. The resulting crisis could tip the U.S. economy back into recession next year.

Another popular recommendation is to embrace the bipartisan deficit-reduction plan backed by former Sen. Alan Simpson and Erskine Bowles, a former White House chief of staff. The two men, co-chairmen of a deficit-reduction commission, recommended roughly $1 in tax increases for every $3 in spending cuts.

Here are suggestions from the economists the AP surveyed:


"Strongly endorse the Simpson-Bowles plan as a template for deficit reduction. It is a sensible plan for reducing the deficit without shocking the economy."

â¿¿ Ethan Harris, economist, Bank of America Merrill Lynch.


"Introduce an 8 percent federal sales tax, eliminate all deductions and use the extra revenue to reduce corporate tax rates and marginal income tax rates for those making less than $100,000 per year."

â¿¿ Paul Ashworth, chief US economist, Capital Economics.


"Develop a credible bipartisan deficit-reduction plan that can be passed."

â¿¿ Diane Swonk, chief economist, Mesirow Financial.


To lay the groundwork for another economic stimulus package, "I would explain to the public how the collapse of the housing bubble left a huge gap in demand that can only be filled by a government deficit, at least in the short term. The public has to understand that, just as was the case in the Great Depression, when the economy collapses the government must expand to sustain demand."

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