This is the Cato Daily Podcast for Thursday, November 1st, 2012.

I'm Caleb Brown.

The fiscal cliff is coming.

Tax rate increases that threaten to starve a sluggish economic recovery.

Former Obama advisor Pete Orsack has an idea to fix it.

Cut every American taxpayer a check to deal with the coming rate increases.

But that won't deal with the real problem, according to Dan Mitchell,

Senior Fellow at the Cato Institute.

There's good news and bad news and what Orsaiag is proposing.

The good

for the economy, is that it's not going to be good for the economy for taxes to automatically increase next year.

The bad news is he's looking at the whole thing from McCain'sian perspective,

and he thinks that just giving everyone

a rebate check or a refund check will be somehow offset the damage of higher marginal tax rates.

Well the reason higher marginal tax rates hurt the economy

is not that government's taking money out of our pockets. I mean that's no fun, but it's

discouraging people from working, saving, and investing by altering the trade-off between work and

leisure between saving and consumption. That's the key thing that you don't

solve with Keynesian tax rebates. There's no substitute for low marginal tax rates in terms of trying to

minimize the destructive impact of the tax system. The fiscal cliff is a bit of a

misnomer because a lot of business people, a lot of people who are doing this all-important

investment in the economy have been looking down the road and making their decisions well

...