Thursday, August 2, 2012

I don't understand Glenn Hubbard's Arithmetic

He says he wants federal spending to be reduced to 20 percent of GDP, along with "revenue-neutral" tax reform.  (I think revenue-neutral tax reform is code for reducing the after-tax income of the bottom half of the country further, because after all, Wall Street has suffered too much at the hands of ...well, never mind that for now).

The problem is that according to OMB, current revenues are less than 16 percent of GDP (see Table 1.2).  So is Hubbard advocating a steady-state budget deficit to GDP ratio of four percent per year in perpetuity?