HARVARD GAZETTE ARCHIVES

R. Glenn Hubbard, professor of economics and finance at Columbia University, who served as chairman of the President's Council of Economic Advisers from 2001-03, told the audience that the Bush plan averts short-term downside risks while enhancing the long-term flexibility of the economy. Accelerating marginal tax rate cuts and eliminating the double-taxation of dividends will reduce the costs of capital, Hubbard claimed, providing what he called a "large stimulus to business investment." That investment, he stated, is key to rebuilding the stalled economy.

The costs of enacting such a massive tax cut during wartime drew a pointed response from Gene Sperling, senior fellow at the Council on Foreign Relations and former national economic adviser to President Clinton. Sperling called attention to the deleterious effects of budget deficits on the economy by drawing an analogy with the cumulative effects of candy on human health. "If you combine everything," he said, referring to the Bush administration's tax-cut proposals, "suddenly you've got a $4.6 billion M&M." Such a massive package, Sperling stated, will only increase the federal deficit and drive up interest rates, extending the recession.

Sperling further attacked the "fairness" of the president's plan, claiming that the top 1 percent of American taxpayers will receive more than 44 percent of the tax cut. "It does seem to me virtually obscene that we have taken this dramatic amount of our resources and given it to [so very few] people. There are so many [other] challenges we have and certainly our long-term fiscal situation for Social Security and Medicare certainly should have taken priority over tax cuts."

Hubbard responded by calling Sperling's attack a "phony debate," saying, "I don't think this is a debate over moral philosophy or social justice. I think it's a debate over economics. Most people who become wealthy in this country do so by creating businesses, by being entrepreneurs, by taking risks. All the evidence we have [indicates] that high marginal tax rates discourage those activities. When you say let's just tax these productive activities and redistribute the money, that comes at a very great social cost."