Behind The Romney Plan

October 27, 2012

in Economics

You may already know that Romney has 24 advisers on foreign policy, all neo-cons. Seventeen came from the Bush Administration.

Now we are turning to Romney’s chief adviser on the economy, Glenn Hubbard, formerly Bush’s Council of Economic Advisers Chairman.

In other words, if you miss W’s administration, policies and accomplished missions, you can relive them simply by electing Mitt. Of course, adding another economic catastrophe at this time might delay recovery a few generations.

On occasion I find an article sufficiently enlightening that I feel compelled to add a little to its exposure, provide it a bit more bandwidth. Here is an article by Charles Ferguson, author of Predator Nation and director of the documentary on Wall Street, Inside Job.

Mitt Romney has a credibility problem. He changes his beliefs like laundry (abortion, medical insurance, whether Bin Laden was worth killing, attacking Iran), refuses to disclose his tax returns, and won’t explain how he could possibly pay for the tax cuts he proposes.

But there is another scandal in Romney’s campaign — namely Glenn Hubbard, Romney’s chief economic advisor, who was chairman of the Council of Economic Advisors under George W. Bush, and is now Dean of Columbia Business School.

I interviewed Hubbard for my documentary film Inside Job, and analyzed his record again for my book Predator Nation. The film interview became famous because Hubbard blew his cool after I interrogated him about his conflicts of interest:

“This isn’t a deposition, sir. I was polite enough to give you time, foolishly I now see, but you have three more minutes. Give it your best shot.”

But the really important thing about Hubbard isn’t his personality; it’s that as an economist and an advisor, he is a total, unmitigated disaster.

First, Hubbard has an abysmal track record in economic policy, including the very issues that Romney has made the pillar of his presidential campaign.

Second, like Romney, Hubbard refuses to disclose critical information about his income, conflicts of interest, and paid advocacy activities.

Third, both in public statements and in my personal experience, Hubbard has been evasive, misleading, and even dishonest when discussing both policy issues and his own conflicts of interest.

And last but not least, those conflicts of interest are huge: Hubbard has long advocated policies that Wall Street loves, often without disclosing that he is, in fact, highly paid by Wall Street.

Let’s start with tax cuts, since Romney claims that he can cut tax rates sharply without increasing the deficit, and without benefiting the rich. Mr. Romney claims that tax cuts will be fully paid for by closing loopholes and deductions, and will not add to the deficit; Hubbard has publicly supported Romney’s claims.

Interestingly, Mr. Hubbard has quite a record on this very issue. Shortly after becoming chairman of the Council of Economic Advisors in 2001, he spearheaded the Bush administration’s tax cuts, and he said lots about them. How did that work out?

First, we now know that over half of the benefits of the Bush-Hubbard tax cuts went to the top 1 percent of the population. In part to benefit the wealthy, the tax cuts were also structured to reward investment in financial assets, rather than either consumer spending or real capital investment.

As a result, the tax cuts caused huge budget deficits, yet did little to stimulate growth or job creation: there were basically no new jobs created during the Bush administration, despite adding trillions to the national debt. That is not, however, what Hubbard said would happen. On August 22, 2001, he published an article in the Wall Street Journal entitled “Tax Cuts Won’t Hurt the Surplus.” Oops.

In the article, also, Hubbard predicts that his tax cuts would preserve the Clinton budget surpluses by causing GNP to grow 0.3 percent per year faster.

Hubbard also co-authored an article with William Dudley, then the chief economist of Goldman Sachs, entitled “How Capital Markets Enhance Economic Performance and Job Creation.” It was published by the Goldman Sachs Global Markets Institute in 2004, just as the housing bubble was getting seriously crazy. In my filmed interview, here’s how Hubbard described the article:

INTERVIEWER: In 2004 you co-wrote a paper with William Dudley, who was then the chief economist of Goldman Sachs. What do you think about the arguments you made in that paper?

GLENN HUBBARD: As I recall that paper, the arguments were basically to the effect that healthy capital markets are important for the economy, views that I held before and certainly hold after. Well, here’s what that paper really said.

Hubbard wrote that “The ascendancy of the U.S. capital markets” had yielded “enhanced stability of the U.S. banking system . . . more jobs and higher wages . . . less frequent and milder [recessions] . . . a revolution in housing finance.” Later in the article: “The capital markets have helped make the housing market less volatile . . . ” Next, “Credit crunches . . . are a thing of the past . . . ” and my personal favorite, “The revolution in housing finance has also . . . been important in making the economy less cyclical.”

In other parts of the article, Hubbard and Dudley specifically praise credit default swaps for their role in reducing and spreading risk. Like wow, man.

Hubbard refused to tell me whether he was paid to write that article; no payment is disclosed in the document itself, nor on Hubbard’s CV. Which brings us to Mr. Hubbard’s many, many disclosure problems and conflicts of interest.

After the release of my film Inside Job, Columbia University was forced to establish disclosure requirements for the first time for its professors. At the time, Hubbard stated that he welcomed them. Well, it wasn’t quite that way in our interview. Here are some selections, verbatim and unedited:

INTERVIEWER: Let me go back to your own personal business involvements. I’m looking at your résumé now, and I guess it looks to me as if the majority of your outside activities are consulting and directorship arrangements with the financial services industry. Would you not agree with that characterization?

GLENN HUBBARD: Not to my knowledge. I don’t think my consulting clients are even on my C.V.

INTERVIEWER: Who are your consulting clients?

GLENN HUBBARD: I don’t believe I have to discuss that with you. You have a few more minutes and the interview’s over. Slightly later:

INTERVIEWER: Okay. Who are you a director of?

GLENN HUBBARD: I don’t believe I have to answer that question.

Well, actually, now that Columbia had adopted disclosure regulations, we now know at least something about Hubbard’s income sources, and the overwhelming majority of them are in the financial sector. The HTML version his CV (which you can read here) does not fully disclose his activities, but if you click on the PDF version, you see more.

And what you see is that at least two thirds of his literally dozens of consulting, advisory, and directorship arrangements over the last decade are with the financial sector — MetLife, KKR, Goldman Sachs, Freddie Mac, JPMorgan Chase, Citigroup, the list goes on and on.

Even Columbia’s new policy does not require Hubbard to disclose how much they pay him; all we know currently comes from required SEC disclosures of his director’s fees from the boards of three financial sector companies, which pay him over $700,000 per year.

His total financial sector income, including consulting and speaking, is undoubtedly much higher. Yet here’s how he described his income in our interview, once again verbatim and unedited:

INTERVIEWER: Forgive me, but I’m going to be direct: How does your personal income compare, your private income as opposed to your university salary?

GLENN HUBBARD: Vastly times more, because I write textbooks, so that’s much more remunerative than being a professor.

INTERVIEWER: How about your consulting income from the financial services industry, and your directorships?

GLENN HUBBARD: I don’t do much consulting in the financial services industry. I do have some directorships, but the income from those would be modest compared to my other income.

Textbooks. You read that correctly. As for not doing “much” consulting for the financial sector, I counted consulting or directorships with 29 financial sector firms on your CV. And your $700K per year directorship income is “modest” compared to the other stuff? Really, now, Glenn.

But we’re not done yet. There is a more that Hubbard still hasn’t disclosed, and refused to disclose to us when we were making Inside Job.

On his CV, Hubbard lists The Analysis Group as a consulting client. That is misleading at best. The Analysis Group is one of a half dozen major firms that specializes in matching private companies and lobbying groups, who are the real clients, with professors who they pay to support their positions in regulatory, policy, Congressional, and legal disputes.

It was The Analysis Group, for example, that arranged for Hubbard to testify on behalf of two Bear Stearns hedge fund managers who were prosecuted for securities fraud in 2009. Hubbard was paid $100,000 for his testimony.

Hubbard has been affiliated with the Analysis Group for many years, but when we asked him, he refused to disclose who he had worked for or what he had done.

He also refused to provide us with a copy of the Federal financial disclosure form he was required to submit in 2001; we couldn’t obtain it from the White House, because they had already destroyed (yes, that is interesting, isn’t it?).

Nor has Hubbard provided his total consulting income, his tax returns, or a comprehensive list of his income sources and clients for the period since he left the White House in 2003.

So the next time you hear Mitt Romney refuse to release his tax returns, and then tell you that he can cut taxes and balance the budget while creating lots of jobs, well . . . I would ask you to remember that standing behind every great con artist is someone like . . . Glenn Hubbard.

Mitt’s proposal to reduce tax rates and pay for it by closing loopholes is loopy. The first question would be: why. If everyone ends up paying the same and the Treasury gets the same revenue, why go to all of that trouble? However, there aren’t enough loopholes to cover the cuts. Eliminating all of the loopholes would still add to the deficit. That may be where his $5 trillion tax cut shows up.

Not only does Romney employ Bush’s incompetents, he incorporates their failed policies into his platform. Do you really think doing the same thing again will have a different result?

By the way, Mitt would appoint Hubbard to either Secretary of the Treasury or Chairman of the Federal Reserve – Glenn’s choice.

A Treat

Since you stayed for a very long article, you deserve a bit of entertainment. Here is Bill Maher’s thoughts on some of what you would get with a Romney victory. Sorry for the included commercial.


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Karol

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Robbi Callegari

Hi, i found your article very useful. The Behind The Romney Plan — The Couth Hillbilly page it is well written and has helped me a lot.

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