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Glenn Hubbard is Unhappy About the Budget Deficit

Glenn Hubbard, along with Tim Kane, had a column in the NYT today decrying the budget deficit. The column begins by repeating the warnings of that well known economic expert, Admiral Mike Mullen, that the debt is the “single biggest threat to our national security.”

There is more than a bit of irony in Hubbard writing this sort of piece. Hubbard was the chief economic advisor to President George W. Bush when he pushed through his tax cuts in 2001. The tax cuts, along with the recession and the wars in Afghanistan and Iraq, pushed the budget from a surplus of 2.5 percent of GDP in 2000, to deficits of more than 3.5 percent of GDP in 2003 and 2004. While running large deficits was the right move for the economy in response to the recession created by the collapse of the stock bubble (although there were far better uses for the money than tax cuts to rich people and fighting unnecessary wars), there is more than a bit of inconsistency in Hubbard's apparent willingness to use deficits to boost the economy out of a recession in the last decade while at the same time disparaging President Obama's efforts to use deficits to lift the economy out of a far deeper hole.

The double standard in this piece is explicit. It tells readers:

"When Reagan was sworn into office, gross federal debt equaled 32.5 percent of G.D.P. Under President Obama’s leadership, it has risen above 100 percent."

Readers may not have realized that the debt to GDP ratio had been a consistent downward path from the end of World War II, when it was over 110 percent of GDP, until President Reagan took office. It then began to rise quickly in the 1980s and early 1990s, reaching more than 70 percent of GDP when the first President Bush left office in early 1993. (This is the total debt, which includes the bonds held by Social Security and other government trust funds.)

Dean Baker / August 12, 2013