WASHINGTON, Sept. 17 (Xinhua)-- The United States needs a new growth strategy to increase short-term incentives while keeping the longer-term debt under control by limiting tax loopholes and reforming entitlement programs, said a renowned economist on Tuesday.
"A successful growth and employment strategy would combine substantial reductions in the relative size of the future national debt with immediate permanent tax-rate cuts and a multi-year program of infrastructure spending," said Martin Feldstein, former chairman of the Council of Economic Advisers, and now professor at Harvard.
In an article run by the Wall Street Journal, Feldstein argued that the only way to reduce future deficits without weakening incentives and growth is by cutting future government spending, which requires slowing the growth of the benefits of middle-class retirees and cutting government spending that is built into the tax code.
He estimated that gradually raising the age of Medicare eligibility in line with the age for full Social Security benefits would achieve a budget saving of more than 1 percent of the U.S. gross domestic product (GDP) in 2020 and later years.
"Limiting the tax breaks built into the tax code would also help," he continued, stressing that slower entitlement growth and reduced tax expenditures should be phased in slowly to avoid weakening the recovery.
"Entitlement reforms and a limit on tax expenditures are the keys to creating the framework for the tax-rate reductions and infrastructure spending that can stimulate growth and employment while gradually shrinking the relative size of the national debt," said Feldstein.
"Without such a program, the U.S. economy will continue to limp along with slow growth, declining earnings and weak employment," he added.