These are my answers to a recent survey sent to me by a very careful and knowledgable economist in Washington D. C. My answers are in Bold:
As you may have heard, Congress is toying with the idea of passing new stimulus legislation. I am very interested in what you think about that possibility. Could you please take a few moments to answer (on background) the following three questions? Thank you.
#1: Given current economic forecasts, do you think a new economic stimulus measure is appropriate?
Yes. By passing legislation to lock in the current marginal tax rates to eliminate any ambiguity re: marginal tax rates in the future. Temporary tax cuts we know are of little value given the empirical impact of the last one and the volumes of literature on the permanent income hypothesis.
#2: If your answer to the first question is "yes," what form should the stimulus measure take? Please check all that apply:
If you are going to do it then at least start fixing bridges so they don’t fall down over the Mississippi River and such like that. Don't build bridges to nowhere. But building side-by-side roads to nowhere like the Japanese did is stupid too. And I have zero expectation that any public spending would be other than more bridges to nowhere. And help out the poor Joe who lost his job. And one more thing...reduce corporate taxes so firms are not compelled to ship jobs overseas given the punatively high US corporate tax rate in comparison to other major industrial powers.
______ Refundable income tax rebates (e.g., another $600 check)
_X_____ Infrastructure projects
___X___ Cut in corporate tax rates
______ Aid to state and local governments
______ Incentives for new investment (e.g., accelerated depreciation)
______ Increased food stamp benefits
_X_____ Extended unemployment benefits
______ Other (please describe)
#3: If you could unilaterally rewrite U.S. economic policy, what are the one or two most important changes you would make?
I would go back to the Tax Reform Act of 1986 where we widened the base and lowered the marginal rates down to 15% and 28%. Further, I would make reform of Social Security and Medicare a national emergency focusing mostly if not completely on expenditures and not revenues. We know from the CBO that the taxes required to fund the promised actuarial obligations would choke the life out of us.