R. Glenn Hubbard and the Republican-Democratic fiscal divide

August 23, 2012

If you aren’t American, the possibility that this election could hinge on abortion rights may seem absurd. Surely the stagnant world economy, the relative decline of U.S. power and climate change, just to name three, all trump reproductive freedom as issues that should be at the top of the national agenda.

But up close the focus on abortion is less bewildering. If, like Todd Akin, the Missouri congressman whose comments about rape focused the United States’ attention on the subject of abortion this week, you believe embryos are full-fledged human beings, no issue is as important as what you view as the continuing and legal murder of these innocents. If, on the other hand, you are a woman of childbearing age who happens not to share Akin’s beliefs, no issue is as important as the right to control your own body, which the congressman’s view threatens.

Having said all of that, the spotlight on abortion rights is also the product of a family feud inside the Republican Party. Republican grass-roots activists are desperate to propel the issue to the top of the national agenda, while the party’s elders — and their presidential nominee — are equally desperate to stop us all from talking about it.

If Mitt Romney has his way, the focus will eventually swing back to the issue that most voters spend the most time thinking about: the economy. And if that happens, a man worth talking to is R. Glenn Hubbard, a top Romney adviser who served as the chairman of George W. Bush’s Council of Economic Advisers and is now the dean of Columbia Business School.

Hubbard sees this election as one that offers Americans a sharp choice about the kind of country they want to live in. “The real issue for the public is to figure out which narrative do we want,” Hubbard said in a conversation in his office on the Columbia campus this week. “We can have a bigger government, if that’s the public’s choice. It’ll just require higher taxes on every American.”

“Do you want that,” he asked, “or do you want smaller government, smaller taxes?”

Hubbard is right that the ideological choice U.S. voters face when it comes to the economy and, indeed, the nature of their country more broadly, is clear and significant. There’s a reason the political debate is so polarized right now: The United States is at a very real crossroads.

While both parties are happy to describe this contrast in broad terms, when it comes to explaining their visions in more than a single sentence each side is unwilling to trust voters to understand the full implications of their position.

The Republican hypocrisy is to promise lower taxes, a balanced budget and spending cuts that avoid curtailing the essential government services Americans cherish. Eliminating waste and making the state more efficient only goes so far, and Republicans are reluctant to spell out just how much the state would have to shrink to allow a President Romney to both enact his promised tax cuts and balance the budget.

There is, of course, another way to square Romney’s fiscal circle: to adopt the credo of former Vice President Dick Cheney, who argued that Ronald Reagan proved that deficits don’t matter. Under this approach, a Republican administration would focus on cutting taxes first and leave balancing the budget for a little later.

The point of hypocrisy is to say one thing and to do something rather different. But even in these pre-election days of talking points, Hubbard makes very clear that the ticket shared by Romney and Paul Ryan has absolutely no interest in British-style shock therapy.

“Definitely not,” Hubbard said, when I asked him whether Romney was proposing a British scenario. “Part of the problem in Europe and in Britain is that austerity has the impression that we have to make every change today. That’s not true in Europe and it’s especially not true in the United States. What we need is a glide path to fiscal sustainability. It doesn’t have to happen today.”

Call it closet Keynesianism, with a 2013 stealth stimulus disguised as deep tax cuts. That is what many of Romney’s moneyed Wall Street supporters are hoping for — with a further, Nixon-goes-to-China expectation that a tax-cutting President Romney would have the best chance of taming the die-hard Republican deficit hawks in Congress.

The Democratic hypocrisy also involves squaring pledges about taxes with promises of fiscal prudence. President Barack Obama vows to maintain a supportive state — and to extend health care coverage — while not raising taxes for the middle class, and eventually balancing the budget.

This math, as Hubbard pointed out, doesn’t work either. The state programs that many Americans depend on today cost more than what they pay in taxes. Increasing taxes on the rich will help, but that is not enough. Yet, just as the Republicans won’t admit that they can’t balance the budget and cut taxes without shriveling the state to levels many Americans would not tolerate, the Democrats won’t tell you that the more generous state they believe in will only be sustainable if quite a few Americans pay more for it.

You get what you pay for — there’s a message I think American voters are smart enough to understand.

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I don’t see how Romney could run on the economy when his economic adviser was a key economic adviser for Bush. If anyone looks back to January of 2009, they can see the state Bush and Hubbard left the economy in. Even for all their complaining about Obama, the economy is still in far better shape than when bush left office.

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