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Friday, February 23, 2007
Wrong Wrong Wrong!
Glenn Hubbard, former head of the President's Counicl of Economic Advisors, said some ridiculous things on NPR's marketplace yesterday about long-term fiscal problems and the President's budget. Among the many opinions passed as facts, this one merits the most attention:
The president's budget poses a challenging question: Can we restore fiscal discipline without damaging economic growth with higher taxes?...The answer is yes.
Glenn's right. Yes, of course, we could- but that's because higher taxes (i.e. if we don't renew the Bush tax cuts) won't damage the economy in the long run! Even the economists at the Bush Treasury Department agree!
Hubbard also peddles the fiction that higher taxes -categorically- slow down growth. But what you tax is more important than how much you tax. European economies, for example, have had high growth rates and high taxes- they just make sure that they tax people the right way (See Jason Furman's testimony to the Senate Budget Committee, Page 9).
And finally, Hubbard drops the standard conservative line about long-term budget issues: it's a spending problem.
It's time for an honest fiscal conversation. The challenge is spending — and entitlement spending in particular.
But it is not a challenge if higher spending, financed by higher taxes, doesn't damage the economy. Higher spending is only a problem when it's on the wrong thing, or when it's financed the wrong way- i.e. by growth-reducing taxes or excessive deficit spending. The challenge is to figure out what to buy, and how to pay for it, based on our priorities and sound economics.
Glenn Hubbard disagrees. He thinks there's something inherently wrong with government spending. That's his opinion, and it's wrong.
Posted by Matt Lewis
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