Congress should allow the Bush Administration tax cuts to expire because extending them would not be the “best outcome for the U.S. economy,” according to a survey of economists by the National Association of Business Economics released here today at NABE’s annual policy conference.

Almost 80% of respondents said “the country’s long-term budget imbalance might impact the nation’s ability to borrow.”

At the same time, a slightly smaller percentage of the economists surveyed said the Federal Reserve is doing what it should to revive the economy, while an increasing percentage said the White House is.

About two-third of economists responding to the survey said the current posture of monetary policy as controlled by the Federal Reserve was “about right,” down from 70% in the last NABE survey in August.

At the same time, 44% of economists surveyed – up from 35% in August – said White House actions to deal with the Great Recession were “about right.”

“A substantial majority of economists in the survey believe that Congress will act to extend many of” the Bush tax cuts, NABE said in a summary of the responses but “most survey respondents do not view this outcome as best for the U.S. economy with the majority of the panel expressing a preference for retaining the current levels of personal marginal tax rates, as well as those on dividends and capital gains.”

More than half of the economists surveyed – 54% — said the Federal Reserve should adopt a “more restrictive” policy – that is, tighten credit by increasing interest rates or other actions – in the next six months. The Federal Open Market Committee set the benchmark Fed Funds rate at 0% to 0.25% in December 2007, the rate which remains in effect.

In the statement following it last monetary policy meeting at the end of January, the FOMC reiterated its intention to maintain “exceptionally low levels of the federal funds rate for an extended period.”

The percentage of economists surveyed who said fiscal policy – essentially White House actions to address the recession – is about right was the highest since March 2008 when the Bush Administration attempted to deal with the then-incipient downturn. At that time 35% of economists surveyed believed the policy was correct.

Almost two-thirds of the economists surveyed said extending lower tax rates on dividends and capital gains “would produce the best economic outcome” and 51% said a “permanent fix” – unspecified – to the Alternative Minimum Tax would be good for the economy.

Questions about extending the Bush Administration tax cuts and eliminating the estate tax drew a favorable response from a plurality but not a majority of respondents.

Though respondents said the current fiscal stimulus program was  not appropriate, 71% did “not believe that another fiscal stimulus package is warranted.”

An overwhelming majority of respondents, 83%, said Gross Domestic Product is “higher than it would have been without the 2009 stimulus package,” but only 53% said the American Recovery and Reinvestment Act was “a positive factor for the economy over the longer term.”

While a substantial majority of the economists surveyed said they believe Congress will vote to extend many of the Bush Administration tax cuts for middle-income households, most said the action would not be best for the economy, “with the majority of the panel expressing a preference for retaining the current levels of personal marginal tax rates as well as those on dividends and capital gains,” NABE said in its summary of the results.

Advertisements