Over at The Big Picture, Barry Ritholtz asks former Bush 43 Chairman of the Council of Economic Advisors Greg Mankiw a bunch of tough questions and, IMHO, shows that the economist is wearing no clothes.
This all started with Mankiw's piece in The New York Times on October 9 in which he said he will work less if the federal tax cuts on those earning over $250,000 enacted during Bush 43 are not extended. Yesterday, Ritholtz responded by asking Mankiw a number of questions that show that the analysis included in The NYT wasn't quite complete. Mankiw neglected, for example, to include anything about his spending needs and focused almost completely on how much of the additional revenue would be kept after the taxes were imposed. And to get to his bottom line Mankiw included the impact of state taxes and taxes that his heirs will pay (assuming, of course, that he doesn't pass away before the end of this year while the federal estate tax is at 0 percent).
Over at his blog yesterday, Greg Mankiw complained that President Obama's instruction to his cabinet to cut $100 million in spending wasn't worth much. The problem is that Mankiw didn't use the right numbers.
Mankiw said that $100 million out of a $3.5 trillion budget is insignificant. That's true, but the cuts aren't coming from the whole budget; they're coming from the much smaller part of "discretionary spending," that is, the parts of the budget that the members of the cabinet actually control. This excludes interest on the debt, Social Security, and things like contracts from prior years that, if cancelled, would actually cost the government money.
In fact, about two-thirds of the budget should be excluded from Mankiw's calculation for this reason.
On Friday, Greg Mankiw again argued that it makes sense to get rid of the U.S. penny and quotes Treasury Secretary Hank Paulson saying it would make sense. Part of the reason Mankiw wants to eliminate the penny is that it costs more than one cent to make it.
Some quick thoughts.
One of my biggest concerns about the ongoing mortgage situation is the continuing (or even growing) use of anecdotes about what brokers and lenders did to excuse homebuyers from taking any responsibility for their actions.