EconTalk Greg Mankiw on Gasoline Taxes, Keynes and Macroeconomics
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Jan 22, 2007 Greg Mankiw, Harvard economist and former White House adviser, explains modern macro debates and contrasts Keynesian and classical views. He defends a gasoline tax to address pollution and congestion and discusses using that revenue to lower other taxes. He also covers tax reform, entitlement tweaks like raising retirement ages, and tradeoffs between incentives and redistribution.
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Deficits Work Short Term But Crowd Out Long Term
- Deficits can stimulate demand short-run but likely crowd out investment long-run.
- Mankiw emphasizes long-run 'classical' forces: sustained deficits reduce capital accumulation and slow growth.
Keynesian Multipliers Are Modest And Temporary
- Estimated fiscal multipliers are smaller and primarily short-run phenomena.
- Mankiw stresses empirical work shows multipliers 'not that big' and long-run effects vanish as crowding out dominates.
Tax Cuts Partly Finance Themselves Through Growth
- Dynamic scoring shows tax cuts partly pay for themselves via growth but not fully.
- Mankiw and Weinzierl find labor tax cuts recover ~17%, capital tax cuts ~50%, combined income tax ~25% of static revenue loss long-run.