Ending the stalemate on tax rates, entitlement spending

>>> the white house is continuing to warn of dire consequences for the middle class if congress does not strike a deal to avert painful tax hikes. joining me is the chairman of the white house council of economic advisors alan krueger . thank you for being with us. let's talk about your report yesterday on the economic consequences. you reported that i think the slowdown of growth would be something like 1.7% in 2013 , that consumers would spend $200 billion less. what are the other impacts that you think could be realized if there is no deal on the fiscal cliff?

>> that's right, andrea. we looked at what would happen if the middle-class tax cuts are not extended. the typical middle-class family with two children would see a $2200 tax increase next year if the tax cuts are not extended. that will hit their pocketbook. that would reduce consumption by 1.7 percentage points and reduce gdp growth by 1.4 percentage points and would be a big hit to retailers. we calculate that about $200 billion less would be spent next year than would otherwise be the case if the tax cuts for the middle class are not extended. and just to put that in perspective, that's about four times as much as spent over black friday weekend.

>> why isn't there more action? we don't see the leaders coming to the hill, we don't see any meetings. what is going on perhaps behind the scenes because mitch mcconnell , among others, critics of the president, of course, were saying where is the presidential engagement. why is he going out to the public and continuing a political campaign to drum up support and not engaging one on one, meeting with the leaders again?

>> well, the president has been very much engaged in these issues and he's been engaged for the last several years. he's made it clear he wants balanced solution to our problems, a balance between additional revenues collected from the most fortunate the top 2% of income earners as well as balance in terms of reductions in spending.

>> what do you think of warren buffett 's proposal for a minimum income tax on high earners for people who are now paying so much less, paying what mitt romney paid, paying what warren buffett pays, 14 or 16%, because of capital gains and other investments, what about a minimum tax that would require them to pay 35%?

>> the president has supported the buffet principle for a long time and his state of the union address last year, he supported buffet rule which would set a minimum tax for those who are the most wealthy. but we have a set of problems we need to address. and this requires a comprehensive solution and most importantly, we need to collect additional revenue from the most fortunate which includes raising tax rates to where they were during the clinton years.

>> similarly, what about revisiting simpson-bowles? a lot of people are talking about the framework, a lot of work has been done, are there means testing , further means testing of medicare, for instance, or other kinds of delayed medicare enactment, you know, sliding the age, for instance, kicks in other ways to try to down the road at least realize some real money?

>> well, i think the best solution would be one that not only raises additional revenue, but also brings our spending under control and if you look at where spending growth is the strongest and what's going to cause the biggest problems down the line it tends to be in health care spending.

>> thank you very much. alan krueger . we look forward to the next round of negotiations.