A Map for Finding Our Fiscal Way

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There are likely many images that spring to mind when you start considering the "fiscal cliff," that will bring tax increases and automatic spending cuts next year, if Democrats and Republicans are unable to negotiate a deal to reduce the deficit.

For the dean of Columbia Business School, Glenn Hubbard, the looming austerity crisis brings back memories of summer vacations in Ogunquit, Maine and a scenic coastal walk along a narrow path on a cliff. Hubbard says there is a safe way down the rocky path to reach the beach below, but you just need to find the right way to get there.

Hubbard was the chairman of the Council of Economic Advisers under President George W. Bush, and he explains why our system was set up to create a "fiscal cliff" in the first place.

"None of these fiscal problems, as large as they are, are beyond our grasp," Hubbard says. "Our dysfunction is less about economics than it is about politics."

"Currently, our leaders talk about taxes and spending as if they're different subjects, and of course, at the end of the day, they have to come together," Hubbard explains. Because of this disconnect, the math simply isn't adding up. "If we want to keep current levels of spending, we would have to raise taxes, and by the way we would have to raise taxes on everyone," he says. "All of the tax increases that the president has proposed on upper income households are about 1 percent of GDP. We're many times that off."

In addition to increasing taxes, Glenn Hubbard advises serious reform of entitlement programs. Though it is important for lower income Americans to have access to Social Security and health care, Hubbard does not see a reason to extend these benefits to the wealthy. "We need to accept the proposition that upper income people should be getting less," he says.