As an economic historian, I appreciate what manufacturing has contributed to the United States. It was the engine of growth that allowed us to win two world wars and provided millions of families with a ticket to the middle class. But public policy needs to go beyond sentiment and history.
Christina Romer
Most arguments for instituting or raising a minimum wage are based on fairness and redistribution. Even if workers are getting a competitive wage, many of us are deeply disturbed that some hard-working families still have very little.
Cold-turkey deficit reduction would cause a significant recession. A recent analysis by the Congressional Budget Office estimated that going headlong over the cliff would cause our gross domestic product, which has been growing at an annual rate of around 2 percent, to fall at a rate of 2.9 percent in the first half of 2013.
The right way to deal with a budget problem that was years in the making is by formulating a credible plan to reduce the deficit over time and as the economy is able to withstand the necessary fiscal belt-tightening. That is what President Obama is doing.
Recent research suggests that New Deal programs may actually have had their primary impact on the economy by influencing consumer and business expectations of future growth and inflation.
There's a joke in economics about the drunk who loses his keys in the street but only looks for them under the lightposts. When asked why, he says, 'because that's where the light is.' That's the problem with the deficit.
Raising the minimum wage, as President Obama proposed in his State of the Union address, tends to be more popular with the general public than with economists.
Fewer people working means permanently lower tax revenues.
The stimulus legislation, technically known as the American Recovery and Reinvestment Act of 2009, was a mixture of tax cuts for families and businesses; increased transfer payments, like unemployment insurance; and increased direct government spending, like infrastructure investment.
The stock market crash in October 1929 didn't destroy a particularly large amount of wealth or make people highly pessimistic. Rather, it made companies and consumers very unsure about future income, and so led them to stop spending as they waited for more information.
What we're going to do is redouble our efforts on financial regulatory reform, because that has in it sensible things like say on pay, so at least the shareholders are minding the store, sensible things like saying, for heaven's sakes, compensation should be focused on - on long term, so that you don't have rewards for short-term risk-taking.
Where we're coming down is we currently have $787 billion of stimulus that's been passed. We're certainly focusing on spending that money as quickly and as efficiently and as transparently as we can. We think that's absolutely the right strategy.
I think where I differ a little bit, we absolutely have to think about the deficit looking down the road. And certainly that's something the president has said that we need to, as the economy recovers, have a plan in place for getting it down.
If you look at the studies coming out of the Congressional Budget Office, the number one thing that's going to blow a hole in the deficit as we go forward 20, 30 years is government spending on healthcare.
You know, I think the, the crucial thing, you know, we have put in place what is, is just simply the biggest, boldest recovery package in history, right; the stimulus package, biggest ever; the financial rescue, absolutely comprehensive; a housing plan - that is incredible medicine for the economy. And we fully expect it to work.
We're committed to working with Congress to doing what the president said he was always going to do, which is cut the deficit in half over the - over his first term.
Tax increases appear to have a very large sustained and highly significant negative impact on output.
The goal of long-run economic growth without asset price bubbles is not only achievable, but is something we should expect if we put a sound regulatory framework in place and if policymakers remain vigilant.
Our estimates suggest that a tax increase of 1 percent of GDP reduces output over the next three years by nearly 3 percent. The effect is highly significant.
The basic idea that if you increase government spending or you cut people's taxes that stimulates the economy and lowers the unemployment rate, is a very widely accepted idea. It's in every economics textbook, that's what we teach our undergraduates, and I certainly try to teach them the truth.
If every other store in town is paying workers $9 an hour, one offering $8 will find it hard to hire anyone - perhaps not when unemployment is high, but certainly in normal times. Robust competition is a powerful force helping to ensure that workers are paid what they contribute to their employers' bottom lines.
Many of my students assume that government protection is the only thing ensuring decent wages for most American workers. But basic economics shows that competition between employers for workers can be very effective at preventing businesses from misbehaving.
As a former member of President Obama's economic team, I have a soft spot for the fiscal stimulus legislation he signed just a month after his inauguration.
Recovery measures work better when they raise confidence - as Franklin D. Roosevelt understood. His fireside chats, and his inaugural address proclaiming he would fight the Great Depression with the same resolve he would muster against a foreign foe, were aimed at reassuring Americans.
If you think about it, candidate Obama, Sen. Obama, was running on sort of long-run economic issues, like restoring prosperity to the middle class, dealing with the perennial problem of health care in the United States. He talked a lot about the budget deficit, about the need to transition to clean energy.
A natural way that an economist approaches a problem is to say, here's where I think the economy is going; this is what we need to deal with the problem.
I think something that forces financial institutions to write down underwater mortgages, I think, would be a sensible thing to do.
A successful argument for a government manufacturing policy has to go beyond the feeling that it's better to produce 'real things' than services. American consumers value health care and haircuts as much as washing machines and hair dryers.
In the four decades after World War II, manufacturing jobs paid more than other jobs for given skills. But that is much less true today. Increased international competition has forced American manufacturers to reduce costs. As a result, the pay premium for low-skilled workers in manufacturing is smaller than it once was.
If increasing income equality is the goal, it might be wiser to put money into infrastructure than to subsidize manufacturing. Construction also pays good wages, but with lower educational requirements. And America's infrastructure needs are enormous.
Thanks to former President George W. Bush - remember the compassionate conservative? - I have a good name for the fundamental principle that should guide the Democratic alternative: compassionate deficit reduction.
President Obama has repeatedly urged Congress to let the Bush tax cuts expire for those earning more than $250,000 a year. Increasing rates on top earners is an obvious way to raise revenue from those who can afford it most.
The central question is whether Medicare and Medicaid should remain entitlement programs guaranteeing a certain amount of care, as Democrats believe, or become defined contribution programs in which federal spending is capped, as Republicans suggest.
Honest talk about the deficit is risky. Voters are more enthusiastic about the abstract notion of deficit reduction than about the painful details of accomplishing it.
The most effective way to shake an economy out of a terrible downturn when we're at the zero lower bound is an aggressive change in policy that makes people wake up, say 'this is a new day' and change their expectations.
Making labor less expensive helps firms hire people.
You care about the deficit because it allows you to do things you need to do to help people who are suffering.
Climate change and dependence on foreign oil are problems that won't go away on their own. Tabling plans to deal with them doesn't make it easier for companies to plan and invest; it makes it harder.
