Mitt Romney's economic adviser Glenn Hubbard tells The Willis Report tonight that the economy will continue to suffer from "a rough and tumble year from events all over the world," but that the best stimulus for an anemic American economy is not a payroll tax cut.
"In the near term, the question is what is the most effective stimulus for our economy. I don't think it's a payroll tax cut," he said. "You can consider lower long-term payroll taxes, but that would have to be a part of tax reform."
When asked whether the U.S. should be counseling Europe on how to handle its debt problems, Hubbard, who is also the dean of Columbia Business School, said, "we don't have standing" to advise the continent on a problem afflicting the U.S. economy as well.
Hubbard continued to back his plan for a mass refinancing of homeowners who are current on their mortgage but underwater - that is they owe more than their home is worth. He said the program could pump an additional $70 billion into the economy and would be paid for by mortgage securities holders who are currently benefitting from homeowners inability to refinance. "There is no free lunch," he said.
Hubbard's long career as a financial policy maker included stints as deputy assistant secretary at the U.S. Treasury Department and a consultant to the Federal Reserve Board.
In terms of the European debt crisis, Hubbard had the following to say: "What the Europeans need to do are a handful of things," he said. "First, getting fiscal probity back in the periphery, second is to make sure the European Financial Stability Facility is large enough to wall off contagion, and third get support if those two things happen from the European Central Bank. If that does not happen, the Euro does stand a good chance of coming off the rails, particularly if Italy's troubles widen."
Hubbard says the chances of a double-dip recession for the country is modest but doesn't see very robust growth over the next year. "And, if we had a full-blown European financial crisis, it would definitely tip the likelihood more toward recession in the US."