President Obama’s chief economist on Thursday argued that increasing taxes on the wealthy would stimulate the economy.
Council of Economic Advisers Chairman Alan Krueger echoed Obama's 2012 campaign theme of defending the middle class against Wall Street, arguing income inequality is a “threat” to the economy.
“The evidence suggests...a more fair distribution of income would hasten economic growth,” Krueger said.
He argued that a more progressive tax code would reduce inequality and increase consumer spending, since middle-class workers tends to spend most of their income.
The result could be in the neighborhood of $440 billion in greater consumption, and a higher GDP, Krueger said.
Krueger’s speech at the liberal Center for American Progress — his second public address as Obama’s top economist — resembles the arguments of the Occupy Wall Street movement, and stands in contrast to the agenda of Republicans, who say the key to unlocking economic growth is lowering government spending and regulations and cutting taxes.
Obama has said he is not engaged in “class warfare” by questioning income inequality, and Krueger made the case that changing the distribution of wealth is good for everyone.
Krueger argued that the Bush-era tax rates should be allowed to expire for the wealthy at the end of this year and said the estate tax should return to 2009 levels.
Doing so would help reverse an estimated shift of $1.1 trillion of annual income to the top 1 percent from the bottom 99 percent, he said.
Krueger also said “the economy is slowly healing” in the near term and it is important to sustain its momentum by extending the payroll-tax cut and unemployment benefits.
The administration’s biannual long-term economic forecast is due to be released with the president’s budget, which traditionally appears the first Monday in February.