With the country teetering on the brink of default, Congress and President Barack Obama in the last month have debated the U.S. budget and deficit ad nauseam, reaching a deal to raise the debt ceiling but leaving the U.S, still facing the possibility of a double dip recession. It was enough to terrify Wall Street and give equity markets abroad a case of the jitters. Anyone watching the negotiations unfold in Washington, D.C. was probably thinking that businesspeople might have better answers than politicians.
When Congress returns from the August recess, it will have to hash out the particulars, taking action on at least $1.5 trillion in deficit reduction measures to be recommended by the new Congressional “supercommittee.” While Congressional members are off explaining their meltdowns and tantrums to those in their districts, Bloomberg Businessweek asked top business school professors to weigh in about where they would cut spending and how they would raise revenue to help grow the ailing U.S. economy. Here is what some of them had to say:
Murray Weidenbaum, professor of economics at the Washington University in St. Louis’ Olin Business School and chairman of the Council of Economic Advisers under President Ronald Reagan, says Congress should cut farm, energy, and aviation subsidies, among others, to start. He argues, for example, that farm subsidies often lead to the need for other subsidies, such as those necessary to help developing countries compete against low-cost U.S. farm exports. “Most of the subsidies the government provides are for special-interest groups that do not need them,” he adds.
What Weidenbaum calls “nice-to-have programs,” such as Housing and Urban Development (HUD), should be eliminated because they produce low-priority stuff, he says. In addition, Weidenbaum would closely consider grants the government offers, such as one encouraging states to have employees take sabbaticals, and get rid of the unnecessary ones. Finally, if it were up to Weidenbaum, he would tax Americans. “They ought to make a strong effort to reduce tax loopholes for the rich and middle class,” he says. Specifically, he said he would consider eliminating the deduction for home mortgage interest and taxing the fringe benefits that companies offer employees.
Read the full article: B-School Profs: Fixing the Deficit