On Glenn Hubbard’s Federal Taxes Being 18% of GDP

Dean Baker has some fun with Glenn Hubbard is Unhappy About the Budget Deficit. Dean notes:

Hubbard was the chief economic advisor to President George W. Bush when he pushed through his tax cuts in 2001. The tax cuts, along with the recession and the wars in Afghanistan and Iraq, pushed the budget from a surplus of 2.5 percent of GDP in 2000, to deficits of more than 3.5 percent of GDP in 2003 and 2004. While running large deficits was the right move for the economy in response to the recession created by the collapse of the stock bubble (although there were far better uses for the money than tax cuts to rich people and fighting unnecessary wars), there is more than a bit of inconsistency in Hubbard's apparent willingness to use deficits to boost the economy out of a recession in the last decade while at the same time disparaging President Obama's efforts to use deficits to lift the economy out of a far deeper hole.

This is a lot more to Dean’s rebuttal, but I want to lift one sentence from what Glenn wrote:

The still larger problem lies with Republicans who refuse to face facts. “Starve the beast” has been the mantra of conservatives since Ronald Reagan was president, a belief that, if taxes were low enough for long enough, rational Democrats would have no choice but to agree to bring federal spending down as well. Even though total federal revenue held level at around 18 percent of gross domestic product in recent decades, spending soared.

Glenn wants us to believe that spending is the problem – not a lack of tax revenues. But this last sentence does not square with the facts as our graph of the Federal tax revenue to GDP ratio from 1977 to 2013 shows. Yes, this ratio rose above 18 percent under President Carter. But then we got the Reagan tax cuts. OK, Clinton’s tax increase pushed this ratio near 20 percent by the time George W. Bush took office. And as Dean notes – Team Republican (Glenn being a member) decided to cut taxes again. Over the 2001 to 2013 period, this ratio has averaged only 16.3 percent. In defense of Republican politicians – how can they face the facts if their own economic advisors don’t present them?