The Locker Room

The problem is spending

Posted by Mitch Kokai at 06:40 AM

If you’ve read entries in this forum during the past week, you’re likely to have read arguments in favor of scrapping the Bush tax cuts and in favor of maintaining the lower tax rates associated with those cuts.

This week’s Bloomberg Business Week cover story examines the issue as well, and it starts with the assessment of Glenn Hubbard, dean of Columbia Business School:

The Republican academic was instrumental in designing the tax cuts, first as a Bush campaign insider and then as the President's first chief economic adviser. The idea behind the cuts, enacted in 2001 and 2003, was to encourage work, savings, and investment, thus stimulating long-term economic growth. Hubbard is especially proud of the 2003 cut in taxes on dividends and capital gains, which he calls "the most pro-growth tax reform that anybody did since Kennedy."

Now that the Bush tax cuts are coming up for renewal—they expire on Dec. 31 unless Congress acts—Hubbard has a queasy feeling about them. The cuts, he says, have been undermined by years of deficits. Until the trajectory of spending changes, he says, "deficits are just future taxes. You're just talking about taxes today vs. taxes tomorrow."

Hubbard hits the nail on the head when he discusses the “trajectory of spending.” As regular readers of this forum have learned, government spends too much.

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