From Corporate Governance Watch
Lobsters (Spoilers for "Where the Truth Lies")

Daniel Gross Is Shrill...

Greg Mankiw has driven Daniel Gross shrill. Daniel writes, apropos of Greg Mankiw's oped:

Daniel Gross: May 28, 2006 - June 03, 2006 Archives: Greg Mankiw... posted on his blog the text of his op-ed in today's Wall Street Journal, which bears some close reading. In the early part of this decade, Mankiw worked in the White House as it conspired with the Republican Congress to inflict serious damage on the nation's balance sheet--slashing taxes, generally on the wealthy, again and again; letting the AMT spread further to the middle class; and engaging in an orgy of government spending that included the creation of a massive new open-ended prescription druge entitlement.

So what does Mankiw offer to help clean up the mess? Regressive taxes.... Raise taxes on gas, on carbon, and on cigarettes and alcohol. "Maybe we should consider higher taxes on smoking, drinking, gambling and other activities about which people lack self-control."... But lets not just stick it to the poor, he writes. Lets stick it to the higher earners who live in Democratic-leaning coastal states. Mankiw advocates broadening the tax base by effectively raising federal taxes on people who live in high tax states and by scaling back the mortgage deduction.

Oh, and Mankiw has another idea. Old folks should work longer before they collect retirement benefits. "If we raise the age of eligibility for retirement benefits, people could still retire early, but they would do so on their own nickel, rather than the taxpayer's." Given the state of savings, the median size of 401(K) plans, and the ongoing pension cram-down, a nickel is precisely what many older workers will have to retire on.

In theory, raising the retirement age or the eligibility age for collecting Social Security isn't a bad idea. But that would mean something like a sea change in the way corporate America views it's older workers.... It would be nice if we could all grow old on the job, enjoy ironclad job security, and see our wages rise every year. But not all of us can be tenured professors at Harvard.

One thing, above all, has excited Daniel's ire. It is Mankiw's list of the causes of America's long-run fiscal imbalance:

The government budget is on an unsustainable path. Americans are living longer and having fewer children. Together with advances in medical technology that are driving up health-care costs, this demographic shift means that a budget crunch is coming when the baby-boom generation retires. The promises made to my generation for Social Security, Medicare and Medicaid are just not affordable, given the projected path of tax revenue...

There is no mention of the role played by the Bush tax cuts and the Bush Medicare Drug Benefit in causing these imbalances, is there? Mankiw doesn't say "George W. Bush promised a Medicare Drug Benefit but it is just not affordable, given the projected path of tax revenue..." He says "the promises made to my generation..." Passive voice. Evasion of responsibility.

Mankiw probably has a different view. He (probably) sees himself as undertaking a veiled critique of Bush administration fiscal policy, according to the following syllogism: (i) The long-run fiscal imbalance is a bad thing. (ii) We all know that George W. Bush's fiscal policies play a big role in creating the fiscal imbalance. (iii) Policies that create bad things are unwise. (iv) Therefore George W. Bush's fiscal policy is unwise.

Mankiw, I think, believes that his readers are smart enough to connect the dots, and understand that he thinks that passing the Medicare Drug Benefit without making any provision for funding it was a really bad idea, and that tax cuts without offsetting spending reductions do more economic harm than good.

Comments