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.
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.
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.
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.
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.
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.
