I have just sent a letter to the editor to the Wall Street Journal, commenting on an article published this morning by R. Glenn Hubbard, dean of the Columbia University Business School and chairman of the Council of Economic Advisors under President George W. Bush. Read the article here.
Here is my letter:
To the editor:
R. Glenn Hubbard, after reciting a standard list of bad trends, tells us that "If taxes were increased sufficiently to accomodate the CBO's projected increase in entitlement spending, long-term U.S. GDP growth rates would be reduced ...unacceptably lowering our future living standards."
There are two problems with this statement. First, since GDP growth increases pressure on finite resources and may surpass the carrying capacity of the environment, we should not assume that growth is good.
Second, Medicare, Medicaid, and Social Security increase personal security against bad fortune, which might outweigh any decrease in GDP and actually increase future living standards. People willingly accept reduced current consumption in order to buy the security provided by various kinds of insurance, and the same logic can apply to insurance purchased collectively via entitlement programs.
Hubbard does make an excellent point when he says that "the tax increases [to pay for the president's welfare state ambitions] must necessarily be broad-based. . . ." While elimination of favorable tax treatment for the rich, including the scandalous taxation of "carried interest" at capital gains rates, may help, tax increases on the general population will also be necessary. And if the reasons for these increases are properly explained to the public, it may be willing to support them.
Paul deLespinasse, Ph.D.
Professor Emeritus of Political Science
Adrian, Michigan 49221
Now living in Corvallis, Oregon