I just read the Glenn Hubbard editorial in the WSJ claiming that the President's budget is really a secret plan to raise everyone's taxes by11%.
Glenn and I have been friends for pushing 20 years but on this one, Glenn seems to have jumped the shark.
Basically Hubbard says he has looked at the Obama budget and, according to his calculation, after subtracting off the revenue projected from returning to the Clinton rates for high income people plus adding a Buffett rule, Obama's budget will raise everyone's taxes by 11% to stabilize things as a share of GDP.
Two things stuck out to me here:
1) Hubbard's numbers seem in pretty serious danger of violating the league's substance abuse policy.
His claim that the President's budget requires large tax increases on the middle class to stabilize the debt is just factually wrong. Just go look at the Congressional Budget Office's numbers. They examined the President's budget and directly refute the central claim of the op-ed: http://www.cbo.gov/sites/default/files/cbofiles/attachments/03-16-APB1.pdf
Figure 2 on page 6 shows their forecast of debt as a shareof GDP with the President's budget--and it's stabilized and falling without any taxes on the middle class. Figure 1 shows similar stability on the deficit.
I can understand the argument of some people when they say that Republicans will never allow the Obama budget to pass so it would be better to debate the right approach to reaching a grand bargain rather than arguing about the administration budget. That's probably true but unlikely in the election season. I can also understand the people who think that we shouldn't raise revenue only from high income people but to spread it around. But Hubbard isn't saying either of those. He's saying something that looks to me (and the CBO) like it just fundamentally isn't true.
2) Using Hubbard's logic, an alternative title for the piece would be HOW MITT ROMNEY'S BUDGET WILL CUT SOCIAL SECURITY AND MEDICARE BY 26% AND THEN RAISE TAXES ON THE MIDDLE CLASS BY $3 TRILLION
Sadly, I'm being only slightly flip about it. Hubbard imputes future policy based on the implications of the budget plan. So what happens if you do that for Romney's budget promises? Well, he has proposed a multi-trillion dollar tax cut, a balanced budget amendment to the constitution and a cap on government spending at 20%.
The cap forces a cut of social security and medicare (and everything else) of 26% (you can see the numbers for yourself at http://www.cbpp.org/files/1-23-12bud.pdf).
But his tax cut reduces revenue by an additional $3 trillion or so. Using Mr. Hubbard's argument then,the Romney budget will raise taxes on everyone earning less than $200,000 per year to cover it (and since the deductions Romney says he will limit don't come remotely close to paying for the cost of the tax cuts, it's a bit like having your cousin take all the money from your wallet but offer to let you rummage through the couch for coins as repayment).
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I agree with Glenn that one of the key debates in the election should be about how America should deal with our long run budget challenge (that comes from the aging of our population).
And that debate is coming down to one camp saying let's have cuts to spending and interest of around $3 trillion and tax revenue of $1 trillion to hit the deficit cutting target and the other camp saying let's have cuts of $7 trillion to hit the deficit target plus pay for $3 trillion of tax cuts.
Hubbard closed his op-ed by saying that he just wants people to see the prices on the menu. Well then, next item: The Romney Budget. Glenn, you may want to practice your Heimlich maneuver.
