The Absurd Report

The Bear on Aug 14 2008 at 8:24 am | Filed under: Election 08’, Taxes

Nobel Prize winner and Columbia University economist Robert Mundell, a principal contributor to the creation of the euro, says that ending the Bush tax cuts — as proposed by presumptive Democratic presidential nominee Barack Obama — would cause “a big recession, a nosedive.”

In an interview with The Wall Street Journal, Mundell said, “the most important thing that could be done with respect to tax rates is to make the Bush tax cuts permanent.”

Mundell, an expert in many areas of economics including the proposition that low taxes stimulate an economy, also provided the intellectual groundwork behind the Reagan tax-cut revolution.

The Reagan-era tax cuts — the so-called “supply-side economics” approach to encouraging economic growth — were “as important to the United States as the creation of the euro was to Europe — a fundamental change,” Mundell says.

Of the long list of financial woes afflicting the U.S. and global economies, Mundell says “the big issue economically … is what’s going to happen to taxes.”

Abruptly raising taxes could be “lethal,” according to Mundell.

“This would be devastating to the world economy, to the United States, and it would be, I think, political suicide,” says Mundell.