By Justin Maiman
America has a long tradition of embracing thrift. It’s been drilled into generation after generation as a sign of high moral standing. But could excessive and ongoing government-backed thriftiness (here and around the world) be pushing the economy into a sinkhole?
Glenn Hubbard doesn’t think so. The former chairman of George W. Bush’s Council of Economic Advisers thinks entitlements like Social Security and Medicare are to blame and are the root of the biggest problems facing America today.
Hubbard, who is also the Dean of Columbia Business School, says debt elbows out everything else that government does—except entitlements—and in the process strangles growth. So what can be done about it? He lays out a plan during an interview with Aaron Task on The Daily Ticker as he makes the rounds promoting a new book, co-authored with Tim Kane, called “Balance: The Economics of Great Powers from Ancient Rome to Modern America.”
“Perhaps what the country needs right now is less of an activist Fed and a little bit more of an activist government," he says in the accompanying video.
Hubbard goes on to point out the obvious but important reality of The Great American Way – politicians get too caught up in the here and now, and ignore real long-term problems and potential crises – like a run-up in debt.
“Most great powers when they stumble fall from within, not from pressure from without," Hubbard argues. "That’s America’s risk.”
Hubbard cites the partially discredited Reinhart and Rogoff study (their argument: growth suffers when government debt crosses 90% of GDP) to support the assertions he and Kane put forth. Asked about the Reinhart and Rogoff data kerfuffle, and whether it undermines his overall case, he pointed to “probably” 50 studies in the “literature” and wrapped up his answer by saying: “The real issue is… is debt rising to an unsustainable level and the answer to that question is yes.”
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