Inside: - UW-Milwaukee

Bradley Distinguished Lecture Series
Economist Hubbard Credits Sound Policy and
Nature of American Economy for Its Resilience
Glenn Hubbard
In describing America’s strong
economy to a Milwaukee audience
recently, Glenn Hubbard used bold
phrases such as “productivity miracle”
and “growth revolution of the United
States.” Hubbard is the former Chairman
of the President’s Council of Economic
Advisers (2001-03), and currently serves
as Dean and Russell L. Carson Professor
of Finance and Economics at the Columbia
Business School.
He spoke to the business community and
Lubar School alumni at the Bradley
Distinguished Lecture Series in early April.
The series is co-sponsored by The Lynde
and Harry Bradley Foundation and the
Sheldon B. Lubar School of Business.
“The American economy has performed
extraordinarily well through a set of
shocks that anybody would have called
devastating, including investment collapse,
equity market collapse, terrorism,
accounting scandals, and geopolitical
risks,” he said.
Why is this? Hubbard credits both sound
policy and the foundations of the American
economy for its resilience.
“Monetary policy plays a starring role in
the U.S., both in cushioning the downturns
and enhancing the upturns,” he stated.
He also asserted that President Bush’s tax
policy has had a signifi cant impact on the
nation’s economic recovery.
Still, Hubbard argued, too much focus is
placed on policy developments, when
much of our experience is due to the
basic underpinnings of the American
economy. “There is something about
American institutions that matters a great
deal,” he said.
For example, he noted — because of the
market for risk capital in the U.S. —
“we’re able systematically to take funds
and bring to market types of risks that are
unheard of in much of the affl uent world.”
He also pointed to the fact that the
American labor system allows great
fl exibility with how we allocate our talent
— in this country and around the world.
“But this long term success story is not
manna from heaven,” he said. “It requires
stewardship.”
Though Hubbard is confi dent that
economic recovery still has very much life
and room to grow — projecting growth in
the 2.5% to 3% range with substantial
upside potential — he cautions against
specifi c risks.
These risks include infl ation, the “puzzlingly
low” capital spending by business,
and potential overregulation in capital
markets.
Hubbard is also concerned about the
current level of protectionist sentiment in
the U.S. “Never in my career have I seen
such support on both sides of the aisle
and from business leaders,” he stated. If
this sentiment is translated into policy, he
said, we run the risk of “derailing” the
economy.
“Competition from any source infl uences
productivity growth and creates an
incentive to innovate,” he concluded.
“Trade matters.”
In addition to his responsibilities at
Columbia, Glenn Hubbard is a research
associate at the National Bureau of
Economic Research and a visiting scholar
at the American Enterprise Institute in
Washington. During his term as CEA
Chairman, he chaired the Economic
Policy Committee of the OECD. He was
Deputy Assistant Secretary of the U.S.
Treasury Department for Tax Policy from
1991-93.
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