Many of my students assume that government protection is the only thing ensuring decent wages for most American workers. But basic economics shows that competition between employers for workers can be very effective at preventing businesses from misbehaving.
Recovery measures work better when they raise confidence - as Franklin D. Roosevelt understood. His fireside chats, and his inaugural address proclaiming he would fight the Great Depression with the same resolve he would muster against a foreign foe, were aimed at reassuring Americans.
If you think about it, candidate Obama, Sen. Obama, was running on sort of long-run economic issues, like restoring prosperity to the middle class, dealing with the perennial problem of health care in the United States. He talked a lot about the budget deficit, about the need to transition to clean energy.
A natural way that an economist approaches a problem is to say, here's where I think the economy is going; this is what we need to deal with the problem.
I think something that forces financial institutions to write down underwater mortgages, I think, would be a sensible thing to do.
A successful argument for a government manufacturing policy has to go beyond the feeling that it's better to produce 'real things' than services. American consumers value health care and haircuts as much as washing machines and hair dryers.
In the four decades after World War II, manufacturing jobs paid more than other jobs for given skills. But that is much less true today. Increased international competition has forced American manufacturers to reduce costs. As a result, the pay premium for low-skilled workers in manufacturing is smaller than it once was.
If increasing income equality is the goal, it might be wiser to put money into infrastructure than to subsidize manufacturing. Construction also pays good wages, but with lower educational requirements. And America's infrastructure needs are enormous.
Thanks to former President George W. Bush - remember the compassionate conservative? - I have a good name for the fundamental principle that should guide the Democratic alternative: compassionate deficit reduction.
President Obama has repeatedly urged Congress to let the Bush tax cuts expire for those earning more than $250,000 a year. Increasing rates on top earners is an obvious way to raise revenue from those who can afford it most.
As an economic historian, I appreciate what manufacturing has contributed to the United States. It was the engine of growth that allowed us to win two world wars and provided millions of families with a ticket to the middle class. But public policy needs to go beyond sentiment and history.
The central question is whether Medicare and Medicaid should remain entitlement programs guaranteeing a certain amount of care, as Democrats believe, or become defined contribution programs in which federal spending is capped, as Republicans suggest.
Honest talk about the deficit is risky. Voters are more enthusiastic about the abstract notion of deficit reduction than about the painful details of accomplishing it.
The most effective way to shake an economy out of a terrible downturn when we're at the zero lower bound is an aggressive change in policy that makes people wake up, say 'this is a new day' and change their expectations.
Making labor less expensive helps firms hire people.
You care about the deficit because it allows you to do things you need to do to help people who are suffering.
There's a joke in economics about the drunk who loses his keys in the street but only looks for them under the lightposts. When asked why, he says, 'because that's where the light is.' That's the problem with the deficit.
Climate change and dependence on foreign oil are problems that won't go away on their own. Tabling plans to deal with them doesn't make it easier for companies to plan and invest; it makes it harder.
