thought maybe this deserved its own thread
Russ Wiles
The Arizona Republic
Oct. 19, 2004 12:00 AM
Americans will spend the next two weeks trying to sort through the differences between President George W. Bush and Democratic challenger Sen. John Kerry on many issues.
But on the economic front, especially when it comes to taxes and economic growth, the president's policies are more likely to bear fruit, according to Arizona's new Nobel Prize laureate.
"That's an easy one," said Edward Prescott, the Arizona State University professor who shared the 2004 Nobel Prize for economics. advertisement
"When you cut tax rates, employment always goes up," he said in a phone interview Monday with The Arizona Republic.
Prescott, speaking from Minnesota, where he advises the Federal Reserve Bank of Minneapolis, described Kerry's plan to roll back tax cuts for top wage-earners as counterproductive.
"The idea that you can increase taxes and stimulate the economy is pretty damn stupid," he said.
Bush's campaign on Monday released a letter signed by Prescott and five other Nobel laureates critical of Kerry's proposal to roll back tax reductions for families earning $200,000 or more.
In The Republic interview, he said such a policy would discourage people from working.
"It's easy to get over $200,000 in income with two wage earners in a household," Prescott said. "We want those highly educated, talented people to work."
Prescott also gave Bush the nod on another controversial campaign issue, dismissing Kerry's claims that outsourcing of jobs is damaging the economy.
"All the rich countries are economically integrated," he said, citing a jump in productivity and wealth in Western Europe after Germany, France and neighboring nations formed the Common Market after World War II.
By contrast, Prescott cited high tariffs imposed by the United States as a "disaster" that exacerbated the Great Depression.
"All economists are for free trade," he said.
Prescott also backed the idea, espoused by Bush, to reform Social Security by allowing some workers to place a portion of their payroll taxes into private savings accounts.
Such an arrangement would give people greater incentive to work, thus leading eventually to higher tax revenue, Prescott said.
Prescott, who shared the Nobel Prize with a colleague from the University of California Santa Barbara, also said he thought the stock market currently is about 20 percent undervalued, in contrast to a 15 percent overvalued threshold when stocks peaked in March 2000. He said that assessment was based on the value of productive corporate assets adjusted for tax rates.
