Bush adviser Glenn Hubbard on how to make entitlement reform fair

As we enter a new earnings season, many market watchers are cautiously optimistic about the state of the U.S. economy and its recovery.Yet some, including former Obama White House economic adviser Larry Summers, worry that the recovery is not happening fast enough.

"When the economy goes down there is less capital investment, some people who lose their jobs and never come back to working, some young people never get on the track that they hope to," Summers told Marketplace. "So the temporary blemish of a downturn leaves a permanent scar."

Glenn Hubbard, who was Chair of the White House Economic Council of Advisers under President George W. Bush, joined Marketplace Morning Report host Jeremy Hobson to discuss the economy and where its headed from his point of view.

On why stocks are booming despite a tepid job and housing market:

Hubbard: "It's a complicated picture in the economy. I expect first quarter GDP growth to actually be relatively healthy. The economy has some underlying momentum in it, particularly coming from the housing sector and durable goods. But there is a lot of uncertainty in the economy, principally from public policy, and that really holds back the job market and long-term investments."

On his advice for Washington lawmakers:

Hubbard: "The first thing would be to reduce uncertainty by agreeing on gradual deficit reductions. Unfortunately the debate in Washinton and in Europe tends to be about austerity today -- that's not really the issue. The issue is gradual spending restraint, principally in entitlement programs. It needs to be fair -- let's do the entitlement adjustments progressively, slow down Social Security growth and/or Medical subsidy growth for more affluent people.

To hear more from Glenn Hubbard on tax increases, entitlement reform and the deficit, click on the audio player above.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.
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If we taxed all corporate revenue, regardless of origin, we would solve two problems: wealth inequality, and the deficit.

Hubbard's assertion that uncertainty is the cause of our economic malaise is both unfounded and absurd. I wish Mr. Hobson had the presence of mind to challenge him on this floating of Republican voodoo economic theory. "Where is your evidence," Mr. Hubbard?

Lack of cash-flow through the economy---lack of purchasing power by the masses---is by far a more accurate diagnosis, but the prescription (more spending) does not conform to Republican talking points. Once again, conservatives trot out dogma quite far removed from both fact and reality. Austerity, which is really what Mr. Hubbard is preaching, is akin to medieval bleeding of quite-sick patients.

Please---let's have no more presentation of such dogma as fact-based news by Marketplace. It does both truth and NPR-affiliate stations a huge disservice.

I'm with Hubbard agreeing on gradual deficit reductions. He loses me when he includes Social Security as part of entitlement reform to reduce the deficit. Social Security has NOTHING to do with the deficit. It's entirely funded by payroll deductions. If you reduce the outgo of Social Security that money would not go into the general fund. Why is this so difficult for pundits to admit?

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