The behavior of consumers and businesses would be virtually unchanged if, tomorrow, Congress provided a clear, complete explanation of how the U.S. would remain fiscally sound over the next 50 years.
If you ask an economist why we have such high unemployment, you’re likely to hear a number of answers. Many will say that businesses aren’t sensing strong enough demand by consumers to warrant additional hiring. Others will claim that regulatory uncertainty is preventing more aggressive expansion. Some will say the taxes are just too high. A few might point to structural problems in industries like construction or financial services. But could the problem be uncertainty about how the U.S. will close its deficit in the future?
This is a contention made in a Bloomberg op-ed by Glenn Hubbard, former Council of Economic Advisers Chair under President George W. Bush and current advisor to Mitt Romney. Much of the piece is quite good. He says that additional short-term stimulus won’t help, if it’s financed by raising taxes in the short-term. That’s correct. He goes on to argue that any additional stimulus should include a plan to offsets that new spending in future years. That’s also sensible.
Then, he loses me.
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Source: Daniel Indiviglio | The Atlantic