## Monday, October 8, 2012

### Questions to Glenn Hubbard, question to Jeffrey Liebman

I've been asked casually to list a set of questions for Glenn Hubbard and Jeffrey Liebman, economic advisors to Romney and Obama respectively,  for the Presidential Economic Advisers Forum 2012

It turns out that I had a lot of questions for Glenn Hubbard because I'm biased. Here's what I jolted quickly in full:
Hey Glenn,
There's the max level of deductions that Romney mentioned,  as a way to fund his tax cuts. The  First time he proposed it it was $17000. At the debate, it was “One way, for instance, would be to have a single number. Make up a number,$25,000, $50,000. Anybody can have deductions up to that amount.”. Any idea what the number would be? Should it be a single number, or be progressive? Do you believe in redistribution, by the way? You said in your WSJ editorial in August. that "The governor would also reduce the corporate income tax rate—the highest in the world—to 25%. In addition, he would broaden the tax base to ensure that tax reform is revenue-neutral." In your FT editorial last month, you say the same: "The GOP candidate would reform the corporate and individual income taxes, reducing marginal tax rates by just under one-third for the corporate tax and by 20 per cent for the individual income tax, while broadening the tax base to make up lost revenue." You do not say that it won't increase taxes on middle class families, which is the third pillar of the trilemma the TPC has mentioned. Given the deduction cap of$17000, middle income families (above $64,000) will see tax increases. So now, we know what gives on the trilemma, right? In your paper with Mankiw, Taylor and Hasset, and in another WSJ editorial, you say that Bordo's research found that financial crisis in the US had faster recoveries than today. How do you interpret his disagreement with your interpretation of his research? "“This recession is really quite different,” Bordo said. But he didn't see government policy as the obvious cause. “We found that a lot of the difference between what would've been predicted by the normal behavior of recessions and what we observed now is explained by the collapse of residential investment. Put another way, if residential investment were what it was in a normal recovery, we would have recovered already.”" In your paper with Mankiw, Taylor and Hasset, you say that some empirical studies have found that the stimulus had a negative impact. However, the only ones we can find are Taylor's paper (which is one of you co-author, hey) and Conley and Dupor,. You cite Mian and Sufi, but they only considered Cash for Clunkers, and in Sufi's own words, “I strongly believe the evidence shows these private debt overhangs are always longer, the recoveries always slower,” So we're back to Housing. Mr Hubbard.Should we allow a huge refinance program that would "be the equivalent of a huge tax cut", as you proposed last year? Stiglitz and Zandi advocated the same thing in August. In your jobs plan for the campaign, you seem disappointed in Obama's housing policies that you describe as "myriad housing programs that went nowhere". We haven't heard Mr Romney's housing policy except about reforming Fannie and Freddie ("End "Too-Big-To-Fail" And Reform Fannie Mae And Freddie Mac. The Romney-Ryan plan will completely end "too-big-to-fail" by reforming the GSEs. The four years since taxpayers took over Fannie Mae and Freddie Mac, spending$140 billion in the process, is too long to wait for reform. Rather than just talk about reform, a Romney-Ryan Administration will protect taxpayers from additional risk in the future by reforming Fannie Mae and Freddie Mac and provide a long-term, sustainable solution for the future of housing finance reform in our country."), a section that has been widely
criticized for mixing various issues, like "too big to fail" and GSEs. So are we going to have a refinancing plan? Because that's where you could kill Obama.
By the way, Obama economic advisor:
WHAT ABOUT HOUSING? Here are the two pieces I would use: Binyamin Applebaum in August and Zach Goldfarb last year. More precisely, you should look at Amir Sufi's column and paper (mentioned above), who advocates for a big principal writedown program but acknowledges the issue of strategic mortgage modification. So where's Obama going?

So I have fewer questions for Jeffrey Liebman because I started with Hubbard and also because I'm biased.