Hubbard: Fiscal Reform Must Come from Spending Cuts
Glenn Hubbard and Ben Bernanke
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The Fiscal Times
January 5, 2011

The tax bill that President Obama signed to great fanfare last month shows neither presidential leadership nor a turn away from no-holds-barred gridlock. Quite to the contrary, Obama merely signed the bill the G.O.P. handed him, and relations between the White House and Republicans in the Congress that convenes this week will remain bitterly divided ahead of the 2012 election. So, don’t expect major tax or entitlement reform or deficit reduction.

Those are the views of leading Republican economist Glenn Hubbard, dean of the Columbia Business School and chairman of the Council of Economic Advisers from 2001 to 2003 under President George W. Bush. As Bush's top economist, Hubbard pushed for the sweeping income tax cuts that Obama and Congress just extended. Here he answers critics who say that letting the tax cuts expire when the extension ends in two years would be an effective alternative to the deep spending cuts that the chairmen of the president's deficit-reduction panel have proposed.

Never a stranger to controversy, Hubbard rejects the view that taxes should never be raised, arguing that scaling back the home-mortgage interest deduction and other popular tax breaks can help reduce the federal deficit. In this provocative interview, he also responds to his unflattering portrayal in the recently released film Inside Job, which accuses him and other economists of enabling the financial crisis by cozying up to the corporate world.

The Fiscal Times (TFT): We just saw an example of White House and Congressional
bipartisanship in extending the Bush tax cuts. What chance do you see for bipartisanship on budget issues in the new Congress?

Glenn Hubbard (GH): I think there is almost no chance, in the sense that the two sides are way too ideologically apart. The president's views on the budget are that the country's problems can be fixed by raising [marginal] taxes on high-income people, and that's false. You could confiscate the wealth of upper-income people and not fix the problem. The Republicans are in no mood to compromise on entitlement programs, which is what the president wants.

“I have not seen this president lead
on anything on economic policy.”

Now presidential leadership can help. If you look at the tax reform act of 1986, I think that [President Reagan] led that along with the Democrat Dan Rostenkowski, who was chairman of the House Ways and Means Committee. But I have not seen this president lead on anything on economic policy.

TFT: What about extending the Bush tax cuts?

GH: He didn't lead it. He took a bill from the Republicans and knew he had to sign it. You could call that leadership, I guess. Getting out in front of a parade.

TFT: How would you critique the substance of the tax-cut agreement?

GH: I would have extended the entire Internal Revenue Code, which is more or less what happened, until we're ready to have a serious conversation about two subjects. One is the size of government and the second is the right tax system to pay for it. My guess is that's going to happen in the 2012 election and in 2013.