Gregory Mankiw On The Stimulus Package
Frum Forum has asked a group of free market economists to assess the stimulus ideas working their way through Congress. Which should Republicans favor? Which could we live with? Which should be opposed absolutely?
We will be posting replies as they come in.
We will be posting replies as they come in.
Today we hear from Bruce Bartlett, Gregory Mankiw and Eric Rasmusen - affiliations listed at the end of each author's posting.
I would institute an immediate and permanent reduction in the payroll tax, financed by a gradual, permanent, and substantial increase in the gasoline tax. I would make the two tax changes equal in present value, so while the package results in a short-run budget deficit, there is no long-term budget impact. Call it the create-jobs, save-the-environment, reduce-traffic-congestion, budget-neutral tax shift. I recognize that some state governments are now struggling in light of the macroeconomic crisis. For the next two years, I would let each state governor have the authority to divert a portion of the payroll tax cut in his or her state and take the funds instead as state aid. Those governors who think they have valuable infrastructure projects ready to go would take the money. When designing a fiscal stimulus, there is no compelling reason for one size fits all. Let each governor make a choice and answer to his or her state voters.
N. Gregory Mankiw is the Robert M. Beren Professor of Economics at Harvard University.