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Glenn Hubbard Tries to Snooker Jonathan Cohn

Jonathan Cohn:

Jonathan Cohn: A Close Look At Mitt’s Policy Proposalsc: I put these criticisms directly to Glenn Hubbard, the Columbia University economist and a top adviser to Romney. Via e-mail, he (graciously) responded that Romney’s focus on bolstering the economy over the long run, by shrinking government and reducing “regulatory uncertainty,” is actually the best way to improve the economy in the short run, as well:

Here your question appears to be based on an idea that the "short run" and the "long run" are different subjects. That is another underpinning of recent policy errors. Getting the long-term right (e.g., a credible and stable path of tax rates instead of periodic Taxmageddons, entitlement reform instead of a spending binge, and regulatory stability instead of regulatory uncertainty) would encourage investment and consumption today. Such long-term action would also give breathing room for properly done short-run action. Hence, it is no accident that Romney has focused on the right long-term policy. If you want to take a look at the real-world consequences of policy uncertainty, you might consider the research by Nick Bloom (Stanford) and Steve Davis (Chicago), which concludes that returning to pre-financial-crisis levels of policy uncertainty would lead to 2.3 million additional jobs over 18 months.

Anybody not playing for Team Republican would note that:

  1. Romney's budget plans over the next ten years are more irresponsible than Obama's by between $8 and $10 trillion. Introducing an $8 trillion magic asterisk into your budgeting--or planning to boost the national debt by $8 trillion more than the President's plan--is doing a heck of a job on the "uncertainty" front.

  2. The Baker-Bloom-Davis "uncertainty" index is now below its level as of December 2007 and only 60% of its level as of October 2008: Obama has been moving things in the right direction, and we now have less "uncertainty" than under the policies of the late Bush administration.

  3. The principal pieces of the Baker-Bloom-Davis "uncertainty" index are not related to uncertainty about taxes and regulatory policy, but rather to (a) presidential elections, (b) uncertainty about aggregate demand, and © uncertainty about the stability of the financial system (as Baker et al. say in their abstract: "Lehman bankruptcy… TARP legislation… Eurozone crisis… debt-ceiling dispute").

If Hubbard weren't playing for Team Republican right now, he would be saying something like this about Romney's policy plans: "introducing another $8 trillion magic asterisk into the budgeting process is no way to create a stable environment in which people can make their plans, and no way to boost the confidence that might help speed the recovery".