Streams

Entitlement Spending and the Fall of Nations

Tuesday, May 28, 2013

Glenn Hubbard, dean of the Columbia Business School, adviser to Bush I and II, and co-author with Tim Kane, of Balance: The Economics of Great Powers from Ancient Rome to Modern America (Simon & Schuster, 2013), says economic imbalance led to the downfall of past empires and warns that a similar fate is in store for the U.S. if the political stalemate over budget deficits and entitlements continues.

Guests:

Glenn Hubbard

Comments [34]

Kate from Washington Heights

Honestly, when a right winger says "Democrat" as the adjective instead of "Democratic", he kind of shows his cards.

May. 29 2013 12:22 AM
amalgam from NYC by day, NJ by night

@ Chuzzle -

"Nice try, Sparky, LOL......but I'm pretty sure that Adam Smith" stated that the wealthier should pay proportionately more even if he "never envisioned the 55% composite rate (and rising) that [an] upper income New Yorker" now pays.

Of course, I'm pretty sure Adam Smith also never envisioned digital products, tax havens, whatever you want from the contemporary global economy, but in the end you're merely speculating. It seems that Adam Smith considered the rich paying more reasonable, even if he lived in a __completely__ different time and place. Regardless, what is and will always be debated in American politics are the optimal levels of tax rates/expenditures, wealth distribution and so forth, and Adam Smith's precise views won't resolve anything.

May. 28 2013 02:50 PM

@jgarbuz....Ceteris paribus, the global market for labor works the way you explained it. However, ceteris paribus really only exists in the classroom or the laboratory, doesn't it.

Anti-unionism and illegal immigration have held down wages. MFN for China and NAFTA moved production overseas (each of which were neutered of their environmental and worker safety regulations by the GOP). [Most ironically, the 'great sucking sound' that Ross Perot claimed that NAFTA would cause was drowned out by the whoosh of surplussed farm labor that headed for el Norte as American agribusiness gutted the farm labor market south of the border.]

But by far the biggest cause (in my view) of the bad distribution is the economic prestidigitation of low (but constant) inflation. The consumer (and the media) have been focused on inflation while the overall economy has grown at two points faster than inflation. In other words, the worker has been paying attention to not falling behind, when the real game is how to grow with the country. Apparently, only the donor class - who achieve their gains by paying lower tax rates than the rest of us - really counts.

Just as, in theory, it is smarter to move production to the lowest price producer...It's only true if your own surplussed labor can be put to work doing something else. If all they get is the unemployment line, your economy is worse off.

May. 28 2013 11:24 AM
Asalc from human

"Balance" that was Mr Muchdoch's Fox News monogram, No?
Is that a Right-wing, new age equivalent to being "centered".
Reality Check:
The debt which is the the largest and greatest threat to us is not the public debt but rather private debt. This reality is rarely brought into these "academic" therefore, useless, conversations.
Lastly, when will liberal commenters learn that radio, tv, media will never present hostile questions to a guest but rather records the guest for future reference. Just like the NSA is doing now ie recording your comments.
Are we free yet?

May. 28 2013 11:20 AM
Martin Chuzzlewit from Manhattan

@Joe Mirsky-

Nice try, Sparky, LOL......but I'm pretty sure that Adam Smith never envisioned the 55% composite rate (and rising) that upper income New Yorkers now pay.

May. 28 2013 11:09 AM
RJ from prospect hts

What Glenn Hubbard covers under the broad, stigmatized phrase "entitlement programs" represents real-life, actual, flesh and blood human lives: food, life (health *care,* not death care under the current for-profit, insurance- and other institution-based system), roofs over people's heads, clothing, etc. His clumping together these essential programs as minuscule in comparison with the death-focused military-development programs (i.e., munitions developed that the Defense Dept doesn't even want so congresspeople can satisfy military manufacturer donors and so they can avoid true development of jobs in their districts).

Nauseating

May. 28 2013 11:04 AM
MichaelB from Morningside Heights

Late to this conversation, and just catching up...

Ed from Larchmont, you may be correct about it being a symptom, but that doesn't preclude it then becoming a problem in and of itself, from a social-fabric point of view.

May. 28 2013 10:59 AM

He is a shill for the 1 % ers and the military industrial complex. What a sleaze.

May. 28 2013 10:58 AM

Gosh, he was against the Big Pharma subsidy in Part D???? Does this apologist realize that Part D premiums & copays went up even during the 3 year freeze that ended approx. 2 years. ago.

& Predicting the future percentage of "entitlements" expenditures which assumes that what - no one will be hired by companies for the next 20 years??? Is he predicting a continuing GOP austerity that is already killing the EU & UK???

May. 28 2013 10:58 AM
jgarbuz from Queens

To RUCB_Alum from Central New Jersey

The cost of labor is primarily due to international competition. Labor is like anything else, supply and demand. As for rich people, they can live anywhere. They can avoid overtaxation anywhere. They are not peasants bound to the land. If workers could go anywhere on the globe, things would be different. But most of us do not want a "borderless" world, so the only thing to do is to compete and use our brains to find smarter ways of doing things. Look at Elon Musk and Tesla Motors for inspiration. All is not lost by any means.

May. 28 2013 10:58 AM
Sheldon from Brooklyn

That's not the point Mr Hubbard - how can you finance two wars and cut taxes the way Bush did, without running deficits?

May. 28 2013 10:57 AM
Guy from NY

exactly, you are not a foreign policy expert, which makes one wonder what other than ideology is fueling your analysis. This ignorance explains how you can ignore some parts of defense spending inconvenient for your "findings."

May. 28 2013 10:57 AM

BrettG

You are exactly correct.

May. 28 2013 10:54 AM
Nate

Michael from NJ (Ask this guy where he was during the Bush years when spending was out of control. Where was he when Medicare Part D was created without a clue as to funding?) -- thank you. Whatever he says, he was a part of the disastrous Bush administration.

May. 28 2013 10:54 AM
jgarbuz from Queens

A good summary for why the Roman empire declined and disintegrated:

http://answers.yahoo.com/question/index?qid=20081212224229AAu7EHI

May. 28 2013 10:53 AM
RUCB_Alum from Central New Jersey

Wrong. Wrong. Wrong.

The growth in Federal entitlements IS A REACTION to the poor income distribution. The average income of 2013 commands 30% LESS goods and services than the minimum wage worker of 1968. Work the numbers. Folks cannot earn what they need to live on and a larger segment - the bottom quintile - subsists on government transfer payments. [They still earn less than 5% of GDP. One fifth of us colletively earn less than $750B.

Social Security is not an entitlement - outside of disability and survivor benefits - but is an insurance program, into which the average working American has put 12.5% of their income over their work-lives.

May. 28 2013 10:53 AM

"Countries with strong economic growth take better care of the environment"? Tell that to the people who can't go outside in Beijing because the air is so poisonous.

May. 28 2013 10:53 AM
halloran

Why not ask this fellow the question he refused to answer in "Inside Job" -- how much money does he make from the individuals corporations which benefit from the policies he promotes, and who and what are they?

Based on rational market theory, in which Hubbard is a passionate believer, how can he can claim with a straight face that his policy prescriptions are disinterested, when they're so profitable to him personally?

May. 28 2013 10:53 AM

Poor Mr. Hubbard - trying to rescue Rogoff, et al. & keep his Pete Peterson bucks coming. Where are all the jobs that business subsidies, tax cuts for the wealthy, etc. were supposed to generate?

All those $$ hoarded by businesses here and in tax havens aren't circulating to consumers so they can't generate demand for goods & services & more hiring.

A one percenter fighting for his own,

May. 28 2013 10:51 AM
fuva from harlemworld

Another way to guage this guy's credibility: Peep how he comports himself in the 2010 documentary INSIDE JOB...

Light is starting to expose these types.

May. 28 2013 10:51 AM
jgarbuz from Queens

The native Roman population became stagnant and soft, and increasingly Rome became dependent on Germanics and others to protect their frontiers. Many Romans lived on welfare or cheap grain and food subsidies. The Spartans much earlier on went through a similar thing, as their numbers could not keep up. Still, the west Roman empire did remain in place for many centuries nonetheless.

May. 28 2013 10:50 AM
Molly from nyc

What does he mean by "entitlements programs"? Please clarify.

May. 28 2013 10:49 AM
elaine from li

What EXACTLY is meant by entitlements? The fact that the economy is rigged to continually benefit the wealthy at a greater disproportion so that lower and middle classes can never earn enough or have opportunities and are forced to live with entitlements?

May. 28 2013 10:49 AM
Joe Mirsky from Pompton Lakes, NJ

“...I do not believe that the power and duty of the general government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit.”
“...though the people support the government, the government should not support the people.”
— Grover Cleveland, vetoing the Texas Seed Bill, which appropriated $10,000 ($239,500 today) to help drought-stricken Texas farmers in 1887. Cleveland was a Democrat. Cleveland is the face on the thousand dollar bill.

May. 28 2013 10:48 AM
C.E. Connelly from Manhattan

Good lord. I thought we were finally done with this garbage after the election! Cut entitlement spending and increase military spending? Aren't we then still spending the money? IF it's insupportable as entitlement spending how can it be ok as military spending? That's absurd.

May. 28 2013 10:48 AM
Bassett

Brian puleez, please no softball questions for this discredited man.

May. 28 2013 10:48 AM
Michael from NJ

Ask this guy where he was during the Bush years when spending was out of control. Where was he when Medicare Part D was created without a clue as to funding?

May. 28 2013 10:47 AM

What about the entitlement of the red states or BIG agro business to be subsidized.
Why does the federal government have to pay three times to rebuild a home, that is in the path of tornados or floods?

May. 28 2013 10:36 AM
Sheldon from Brooklyn

I would like to know if Mr. Hubbard "advised" Bush II to sign the "prescription drugs benefit" bill?

Dick Cheney once supposedly said: "Reagan proved deficits don't matter." So, does Mr. Hubbard believe that the GOP's 30 year philosophy of deficit spending, whilst cutting taxes to the bone for rick folk, sorry - "job creators" actually worked?

Is social security an "entitlement" if people are paying into it?

May. 28 2013 10:33 AM
Joe Mirsky from Pompton Lakes, NJ

It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
— Adam Smith, The Wealth of Nations, 1776.

May. 28 2013 10:20 AM
jgarbuz from Queens

Thanks to abortion and a low child replacement rate, we have lost 60 million native borns, and have had to import over 30 million immigrants - both legal and illegal - to replace them. To believe this shortfall would not have economic consequences is sheer idiocy. For the next 30 years, till MY "baby boomer" generation finally dies off, the overall economy will remain fairly flat. That is, until a demographic rebalancing takes place. The same is true for Europe, Japan, and eventually China too.

May. 28 2013 10:14 AM
JT from NJ

Brian,

Please ask your guest to address the "middle of the road" argument, which maintains entitlement spending is not a present day problem (after payroll taxes, the deficit for these three programs is under $200 billion), but higher health care costs are more of a concern to future entitlement spending. Rather than increasing tax revenues, which will still leave a shortfall, some suggest that both parties should seriously address making cuts to defense spending where it will not impact our national security but where significant waste is obvious (ie. mediocre contracted jet fighters and subs, cost overruns, etc.).

(Of note, mandatory spending on defense includes important benefits for military personnel and vets, which will only increase with skyrocketing medical costs.)

May. 28 2013 09:51 AM
Ed from Larchmont

Economic imbalance is probably more a symptom of a large economic problem than the cause that needs to be corrected. And, as much as has been said of it, economic inequality, as long as the poor are cared for, is not inherently unjust.

"The problem with socialism is that eventually one runs out of other people's money." Margaret Thatcher

May. 28 2013 05:43 AM
Martin Chuzzlewit from Manhattan

Hey, guys ... sure, let's redistribute everything so that we can all be equally poor.

D'Tocqueville " ....so enamored of "equality" that they would rather be equal in poverty than unequal in wealth."

Tommy Lapid " ....we had fulfilled the socialist dream in 1950's Hungary. We all had exactly the same thing ... nothing."

Chairman Mao "Better a late socialist train than a capitalist train that runs on time."

May. 28 2013 05:19 AM

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