Hubbard, who was adviser to George W. Bush, was also the deputy assistant Treasury secretary for Tax Policy in the Bush I administration, so he advised two of the three presidents who choose cut taxes and not to cut spending, all of which led to huge deficits (see chart below). In fact, George W. Bush started a $3 trillion war of choice in Iraq and became the first president to start a war and not raise a penny to pay for it; he put the whole thing on a Chinese credit card.
If cutting taxes and increasing spending was the key to job creation, the economy would have exploded under but George W. Bush, but it did not. When Bush came to office 2000, the stock market was 10,000 and when he left in 2008, the stock market was 10,000. If you have a 401k retirement fund, it was a wasted decade. If Hubbard's concepts made any sense at all, George W. Bush and his credit card economy would have created an explosion of jobs, at least more than the eight years that Clinton was in office had created. That didn't happen. Taking Hubbard's advice the stock market was 0 for ten years, the deficit went way up, sub-prime loans went crazy, the banks and AIG had to be bailed out, and employment went into the toilet.
Hubbard argues that more money in the hands of the few would lead to greater investment, true, but the question is where would that investment be? More money in the hands of then middle class consumers in the USA would lead them to "investment" in local businesses and services, whereas greater investment in emerging markets like China, would lead to greater competition for U.S. workers, more job loss, and a larger deficit. This country is currently not short of money for investment, in fact, we have 25% of our existing capacity sitting idle. Until much of that capacity is put back to work, that is, until our consumers have some money to spend and assurance that their jobs are not likely to be eliminated, there is no reason to imagine that investors will be rushing to invest in even more capacity in the USA, and, in fact, on 19 Nov 2010, the NY Times report that "Upscale Investors are Looking Abroad" for a better return on their money. (read full article) There is no reason to cut their taxes so they can send more money out of the country.
In this argument we have one if the architects of economic failure in every important area telling us that what he prescribed in 2000, a prescription that almost killed us, will be the best thing for us now. On the other side, we have Noble laureate in economics telling us that we need more money in the hands consumers to get out of this mess.
" those parts of the private sector not burdened by high levels of debt see little reason to increase spending. Corporations are flush with cash — but why expand when so much of the capacity they already have is sitting idle? Consumers who didn’t overborrow can get loans at low rates — but that incentive to spend is more than outweighed by worries about a weak job market. Nobody in the private sector is willing to fill the hole created by the debt overhang...The irony is that in their determination to punish the undeserving, voters are punishing themselves: by rejecting fiscal stimulus and debt relief, they’re perpetuating high unemployment. They are, in effect, cutting off their own jobs to spite their neighbors.
Noble laureate in economics Paul Krugman (read the whole article)
Who are yo going the believe, the guy that drove us into this ditch? Or the guy that warned him and us not to drive into it? The Hubbard record is marked in red on the chart below, all except the little bit next to Obama's name, a disaster Obama inherited from Bush and Hubbard.
There is one critical area that Hubbard avoids completely, the class warfare that has choked off the complaints of organized labor, and denied working families the voice in politics that their numbers deserve. While the productivity of the average worker has doubled or tripled, the share they got from the increased production in the 30 years prior to 1975, ended when campaigns become so expensive that congress had to spend 100 days a year that they used to spend on the people's business, talking to, and getting money from, lobbyists.
"During the three decades after World War II, for example, incomes in the United States rose rapidly and at about the same rate — almost 3 percent a year — for people at all income levels. America had an economically vibrant middle class. Roads and bridges were well maintained, and impressive new infrastructure was being built. People were optimistic.
"By contrast, during the last three decades the economy has grown much more slowly, and our infrastructure has fallen into grave disrepair. Most troubling, all significant income growth has been concentrated at the top of the scale. The share of total income going to the top 1 percent of earners, which stood at 8.9 percent in 1976, rose to 23.5 percent by 2007, but during the same period, the average inflation-adjusted hourly wage declined by more than 7 percent.
"Yet many economists are reluctant to confront rising income inequality directly, saying that whether this trend is good or bad requires a value judgment that is best left to philosophers. But that disclaimer rings hollow. Economics, after all, was founded by moral philosophers, and links between the disciplines remain strong. So economists are well positioned to address this question."
-- Robert H. Frank "Income Inequality: Too Big to Ignore"
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