In an April 25 Wall Street Journal op-ed, Glenn Hubbard, a former chair of President George W. Bush's Council of Economic Advisers and who is now an adviser to GOP presidential candidate Mitt Romney, claimed that the projections contained in President Obama's most recent budget would require an “across-the-board tax increase of 11% for taxpayers with incomes under $200,000” in order to cover the spending. From the op-ed:
Maintaining the president's higher spending will require raising taxes for all Americans. Assuming the president favors raising marginal tax rates over broadening the tax base (consistent with his failure to consider the tax proposals from Bowles-Simpson), an across-the-board tax increase of 11% for taxpayers with incomes under $200,000 would be required to raise the money the president proposes to spend.
But in an April 25 response to Hubbard's op-ed, Austan Goolsbee, a former chair of Obama's Council of Economic Advisers, explained how Hubbard's claim that Obama's budget would require tax increases on the middle class is “factually wrong”:
[Hubbard's] claim that the President's budget requires large tax increases on the middle class to stabilize the debt is just factually wrong. Just go look at the Congressional Budget Office's numbers. They examined the President's budget and directly refute the central claim of the op-ed: http://www.cbo.gov/sites/default/files/cbofiles/attachments/03-16-APB1.pdf
Figure 2 on page 6 shows their forecast of debt as a share of GDP with the President's budget--and it's stabilized and falling without any taxes on the middle class. Figure 1 shows similar stability on the deficit.
I can understand the argument of some people when they say that Republicans will never allow the Obama budget to pass so it would be better to debate the right approach to reaching a grand bargain rather than arguing about the administration budget. That's probably true but unlikely in the election season. I can also understand the people who think that we shouldn't raise revenue only from high income people but to spread it around. But Hubbard isn't saying either of those. He's saying something that looks to me (and the CBO) like it just fundamentally isn't true.
Former White House economic adviser Jared Bernstein -- now a Center for Budget and Policy Priorities senior fellow -- echoed Goolsbee in noting that CBO finds Obama's budget “stabilizes the debt-to-GDP ratio within the 10-year budget window ... without raising taxes on households below $250K.”
Austan firmly nails the two main problems with Glen's analysis. First, either Hubbard, a Romney adviser, is cooking the books, or CBO is. That's right: the Congressional Budget Office finds that the President's budget stabilizes the debt-to-GDP ratio within the 10-year budget window (it's the middle line in the figure below). And it does so without raising taxes on households below $250K.
Bernstein included the following image from CBO's analysis:
