The U.S. economy is on an unsustainable fiscal path and would be better served by removing policy uncertainty, according Glenn Hubbard, adviser to Republican presidential candidate Mitt Romney.
“I don’t accept as an article of faith that lots of short-term stimulus boosts the economy and gets us back on the long-term trajectory,” Hubbard, dean of Columbia University’s business school and former economic adviser to President George W. Bush, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “If we could get our long-term situation better, you’ll clear things up for business people.”
Hubbard said policy uncertainty is “probably killing close to 2 million jobs,” citing research by Stanford University Professor Nicholas Bloom and University of Chicago Professor Steven J. Davis. The economists developed the Economic Policy Uncertainty Index, which set a record last August as Congress pushed to the deadline an agreement to raise the debt limit and Standard & Poor’s stripped the U.S. of its AAA credit rating.
Romney would seek tax, entitlement, regulatory and financial changes, Hubbard said. Economic growth would be improved by reducing marginal tax rates and broadening the base while paying “for that by cleaning up the tax code,” he said.
Federal Reserve Chairman Ben S. Bernanke said today in testimony before the Senate Banking, Housing and Urban Affairs Committee that progress in reducing unemployment is likely to be “frustratingly slow.”
New York Senator Charles Schumer pressed Bernanke to consider more stimulus that could help promote economic growth and reduce the jobless rate in the face of congressional gridlock. Unemployment has held above 8 percent since February 2009.
Schumer, the Senate’s third-ranking Democrat, has blamed Republicans for blocking proposals that Democrats contend will bolster small businesses and create jobs, most recently on July 12 when a Democratic plan to offer tax breaks for hiring and capital investment failed to get the 60 votes needed to advance. That same day, the chamber rejected a Republican proposal to give businesses a 20 percent tax cut.
Romney’s policies would reduce unemployment to about 6 percent or less in his first term if elected president, Hubbard said. The rate is forecast to decline to 7.3 percent by 2014, according the median estimate of economists surveyed by Bloomberg.
The International Monetary Fund expressed “significant concern” yesterday about the U.S. fiscal outlook as the deadline for automatic budget cuts and tax increases approaches at the end of this year.
Romney would “like the Congress to extend the current tax code for a bit so that he can put his tax plan and budget out,” Hubbard said. “That’s really job one for him.”