Two from the New York Times
By Arnold Kling
1. Nobel Laureate Edmund Phelps writes,
One reform would be to create a First National Bank of Innovation — a state-sponsored network of merchant banks that invest in and lend to innovative projects. Another would be to improve corporate governance by tying executives’ compensation to long-term performance rather than one-year profits, and by linking fund managers’ pay to skill in picking stocks, not in marketing their funds. Exempting start-ups from corporate income tax for a time would also help.
We also need a program of tax credits for companies for employing low-wage workers. That may seem counterintuitive at a time when the Obama administration is pressing education and high-paying jobs, but we need to create jobs at all levels. Early last year, Singapore began giving such credits — worth several billion dollars — and staved off a recession. Unemployment there is around 3 percent.
Read the whole thing. I agree with Phelps that the focus on aggregate demand is misplaced. I also really like the idea of tax credits for employing low-wage workers. Of course, as Greg Mankiw pointed out, the minimum wage is like a subsidy for low-wage workers paid for by a tax on firms that hire low-wage workers. Repealing the minimum wage and replacing it with a straight subsidy would be better.
Overall, Phelps is more interventionist than I would be. But his interventions are much more sensible than what we have had the past few years.
The haves are retirees who were once state or municipal workers. Their seemingly guaranteed and ever-escalating monthly pension benefits are breaking budgets nationwide.
The have-nots are taxpayers who don’t have generous pensions. Their 401(k)s or individual retirement accounts have taken a real beating in recent years and are not guaranteed. And soon, many of those people will be paying higher taxes or getting fewer state services as their states put more money aside to cover those pension checks.
As a non-state-employee taxpayer, your stock market beta is double. If stocks go down, not only does the value of your portfolio go down, but your future taxes to pay state pensions go up. The state does not make up your losses. But you make up the state’s.