Just reading from his archives from this post of his he left on his "A Few Timeless Posts" list. This is a piece who wrote for the Wall Street Journal in 2006 entitled "The Pigou Club Manifsesto."
Now this is already an arresting title if you understand that Mankiw is one of the premier New Keynesians... Even more arresting is his argument in the piece for a gasoline tax of $1. Right off the bat, he admits that this may not be a favorite proposal of many campaign managers.
However he argues that, while it may not be politically very sexy-for this reason he recommends a phase-in, it would be a winner economically. According to Mr. Mankiw it would rake in $100 billion per year. He also makes some incentive based arguments-it would tend to discourage more driving and so give us less pollution and road congestion.
It's the argument that he makes for it in it's efficacious benefits for economic growth that raise my eyebrows however. Here is his reasoning:
"Public finance experts have long preached that consumption taxes are better than income taxes for long-run economic growth, because income taxes discourage saving and investment. Gas is a component of consumption. An increased reliance on gas taxes over income taxes would make the tax code more favorable to growth. It would also encourage firms to devote more R&D spending to the search for gasoline substitutes."
Yes that sounds very Keynesian to eschew even in principle supply side taxes but focus them all on the consumption side. Even if you agree that income taxes discourage saving and investment-in reality it is not that simple- do significant consumption tax hikes not discourage consumption? When you consider that 70 percent of economic growth are driven by consumption you wonder how he as a Keynesian-"old or new"-doesn't factor this in.
So we have a distinguished New Keynesian who prefers consumption taxes and is more worried about discouraging saving than consumption and writes a manifesto for the Pigou Club? I thought Keynes believed that problem of human history is the over propensity to save and the comparative lack of investment? In reality savings and investments are not both at all times equally desirable things. What is misleading, in addition, is that this makes it sound like they are one and the same thing when this is not true. Saving in not ivnesting. That much must be understood. Right now we want more investing but less savings.
He was also the Chairman of George W. Bush's Council of Economic Advisers and then an economic adviser to Romney's presidential campaign.
One controversy he had working for Bush is making an argument to collapse the distinction between service jobs and manufacturing jobs-the better to not have to discuss all those lost manufacturing jobs.
Yet with the onset of the 2008 financial crisis Mankiw could say, "If you were going to turn to only one economist to understand the problems facing the economy, there is little doubt that the economist would be John Maynard Keynes. Although Keynes died more than a half-century ago, his diagnosis of recessions and depressions remains the foundation of modern macroeconomics. His insights go a long way toward explaining the challenges we now confront."
I'm not sure what he thinks Keynes would have told us today. But Mankiw himself opposed fiscal stimulus-something Keynes clearly supported in principle. Something Mankiw did write recently about Keynes however was his speculation that Keynes would have opposed "ObamaCare."
Certainly a good use of Keynes. Let me ask you though, Greg, would Keynes have opposed RomneyCare as well or does the fact it was done only for Massachusetts make all the difference?