Glenn Hubbard is half right

Writing in today’s Financial Times, Glenn Hubbard argues–correctly–that the debate over the debt ceiling in Washington is misplaced. Rather than focus on the debt ceiling, he suggests that Congress and the Administration ought to consider the deficit.

Or, as he puts it: “My wife and I don’t vote on whether we will pay our bills. Rather, we discuss whether our spending or income needs adjustment. So too must it be for our national “family”.”

Although I’ve never been too wild about the “the US government should act just like the American family” argument, since US households currently owe more to creditors than the US government does, he is right about the debt ceiling: not raising the debt ceiling would be foolish and self-destructive.

Still, if he had stopped there, I could have lived with it.  And I would have forgotten all about the fact that during his tenure as George W. Bush’s Chairman of Council of Economic Advisers (2001-2003), the US budget surplus of 1.3 percent of GDP was transformed into a budget deficit equal to 3.4 percent of GDP.

But then, he continued: “Ruling out long-term entitlement spending restraint, Mr Obama has argued that fiscal sustainability can be accomplished by raising marginal tax rates on households earning more than $250,000 per year. This is simply not true.”

What is simply not true is that the Obama Administration has made that argument.  In fact, the Obama Administration has proposed substantial spending cuts as well.  Glenn Hubbard ought to know better.