Greenspan, other experts at Finance hearing to paint gloomy economic picture

but witnesses expected to also testify trillions could be realized by closing tax loopholes

September 13, 2011

Hearing starts at 2 p.m. in Dirksen Room 215

WASHINGTON, D.C. - Expert witnesses at a Senate Finance subcommittee hearing this afternoon are expected to say that America’s debt could be reduced by trillions of dollars, or about a fifth, if the tax code was modernized and whopping loopholes eliminated.

Today’s hearing is by the Senate Finance Subcommittee on Fiscal Responsibility and Economic Growth, chaired by U.S. Sen. Bill Nelson (D-FL).  The subcommittee’s findings will be sent over to a super-panel of lawmakers now looking at ways to trim down our deficit.

Witnesses slated to testify at the 2 p.m. hearing include the former Federal Reserve czar and two prominent Republican presidential economic advisors.  Among the witnesses are Dr. Alan Greenspan, the former Fed chairman; Dr. John B. Taylor, Stanford Professor and Undersecretary of the Treasury for George H.W. Bush; Dr. Martin S. Feldstein, Harvard Professor and President Ronald Reagan’s chief economic advisor; former Michigan Gov. John M. Engler, now the Business Roundtable President; and, Edward D. Kleinbard, University of Southern California professor and former chief of staff of the Joint Committee on Taxation.

Nelson called the hearing to explore how tax reform and closing loopholes can play a major role in deficit reduction plans.  He has long-advocated for a balanced approach that would attack the current economic situation from multiple sides.  “What we’re talking about is simply earmarks by another name,” Nelson said of big tax loopholes.  “Closing some of them makes sense, and we have a real opportunity here to make some significant headway.”

Just since 1986, according to the Joint Committee on Taxation, Congress has enacted 158 new tax breaks or loopholes.

In his testimony, Greenspan is expected to look back at how the U.S. got into the current mess.  He’ll likely paint a bleak picture of the economy going forward. 

 
Taylor is expected to argue that tax reform should be a part of any budget strategy going forward.  “Such (a) comprehensive budget strategy will take us toward a more stable and predictable economic policy with less uncertainty about the future,” he will testify, according to an advance copy of his remarks.

And Feldstein also presses for change.  In advance remarks, he says, “Reducing budget spending through the tax code is the key to better incentives and lower budget deficits.”  He estimates that modernizing the tax code could raise more than $3 trillion over the next decade.

The findings from today’s hearing will be submitted to the Joint Committee on Deficit Reduction.  The committee, formed as part of the Budget Control Act Congress passed last month, is tasked with finding at least $1.5 trillion in spending cuts by the end of November.  These would be in addition to the $900 billion in cuts that were part of the Budget Control Act.  The Super Committee also held its first hearing today.

###