Glen Hubbard’s Agenda - Internal Inconsistencies in the GOP Economic Platform

Sep 10, 2010
Author: SCP Editor

September 10, 2010 - Glenn Hubbard, former Economic Advisor to GW Bush, told Bloomberg Surveillance President Obama’s first step in the implementation of an economic plan from this point is to ‘get rid of the uncertainty.’ Simple – ‘clarify the path we are going to take on financial regulation, on tax policy, it is saying let’s extend the Bush tax cuts until we have the next presidential election so that we can have a real debate with the American people on the size of government and how we are going to pay for it – that would clear up a lot of uncertainty.’

Sure it would. It would certainly add to the increase in debt spending, which is what Hubbard and his allies also want to rail against – an internally inconsistent position with extending the tax cuts. It is a fact that those tax cuts are not paid for.

The crux of the argument is that Obama also wants to let taxes rise next year on the highest wage earners while keeping existing tax cuts for families with annual incomes of $250,000 or less and individuals making $200,000 a year maximum. Republicans insist on keeping the lower tax rates for higher incomes, arguing that doing so would help small businesses too. Obama argues that's a financial burden the country can't afford to bear.The GOP conveniently dismisses history and its implications on this whole debate and is counting on its talk radio army and lobbies to help dumb down America to get its support.

So, let’s review history:

·         When GW took office, he took office with a budget surplus that Clinton left him

·         When GW left office, the nation had sunk into its largest debt in history – it signed on to the first war it has ever fought on the debt (now more than $1 trillion), its strong dollar policy became a novelty argument,  deregulation ran its course and the housing market as well as the financial services industry ran off the rails, and Cheney’s statement that ‘Reagan proved deficits don’t matter’ sounded like the sound of a malicious siren

Back in 2003, in our commentaries, we emphatically complained that GW and his economic policies were running the country into the ground. We lauded Professor and Nobel Laureate George Akerloff’s statement that GW had looted the surplus and pointed to the full page ad Akerloff and many other Nobel prize winners took out in the NY Times declaring the Bush administration’s economic policies the worst in our history.

Of course Hubbard, a former advisor to GW, wants to defend the Bush tax cuts. He can’t do so if he accepts that this is really a have vs. have not agenda, so he conflates us all into a beautiful society led by its strong business sector where about half the people in the top 1% of the income distribution, the people in our communities, are business owners. They are the ones creating jobs and taking risks.

Really? I can say firmly that this half the people in the top 1% of the income distribution do not live in my neighborhood. They do not share my pains. And the risks they take are mitigated by incentives and tax breaks. Hubbard’s argument may work well on a bumper sticker and in a talk radio one-liner but it is hardly compelling when you apply any level of logic to it.

And what of stimulus, is it working? Hubbard says the $814 billion stimulus package is not working. BTW, he says it is equivalent to giving out almost $100K to every newly unemployed person and it isn’t having any effect. He acknowledged the Federal Reserve’s bold actions did help. He said in public policy there were things we could have done, investment incentives, corporate tax cuts, payroll tax cuts – all of these were possible but the President simply rejected them.

Never mind the fact that investment incentives, corporate tax cuts and payroll tax cuts are already a part of the fabric of this economy. Hubbard must be suggesting that these should all have been increased, which would stretch out the debt spending further.

Here are some more facts. Money borrowed from the general fund is, as of the time of this writing, hitting $13.5 trillion. How do the general and trust funds get their money? They get it from all personal and corporate income tax. It would be good for Hubbard to provide a coherent and meaningful argument about how we can, at the same time, cut corporate taxes further while materially paying down the $13.5 trillion debt – fast approaching 100% of GDP, which is unsustainable and has more damnning consequences for this economy than consequences for the families with income of greater than $250,000 if they fail to get to keep their tax cuts.

Hubbard might appeal to Boehner’s economic platitudes. We can have it both ways, extending tax cuts, extending corporate tax cuts, paying down the debt, through incentives on one hand which will help us grow out of this debt, and by cutting pork barrel spending, on the other hand.

First, there is not enough pork in the barrel to account for the massive level of debt this country has built for itself. Not even close, so that is a red herring. Second, it was proved, empirically in the 2001-2008 period that the kind of tax cuts Hubbard is calling for did not help the U.S. grow out of anything but rather, into more debt and disarray. Debt does matter.

In the end, either Hubbard is just a bad economist hell bent on pushing bad economics into the nation’s agenda through the support of talk radio and fair and balanced programming, or he is just deeply entrenched in a political agenda which, as a byproduct deviously conflates that haves and the “have nots” of this country for the sake of voting power, but that is about where the bus stops and where the “have nots” are thrown off the bus. The irony is that so many of them are still so quick to apply the bumper stickers, with the bumper sticker politics to their cars.

For argument’s sake, let’s say that this brand of economics Hubbard is pushing is a different variety than the one he pushed under GW. Let’s say it is different enough to keep us from going down the same economic rabbit holes they led us down back in the 2001-2008 period that may very well have derailed this economy over the longer term. That may be, but the burden of proof is on them to demonstrate how it is different and how, what appears to be internally inconsistent premises (cut debt spending and extend Bush and corporate tax cuts) can be reconciled in a manner that can really lead this economy back down the right path.

So far, their tact is not to provide any reasonable and coherent thesis on this point. Rather, it is just to wind up the spin machine and let the media do what it does so well – dumb down America.