Needed in Treasury Plan: Price-discovery, write-down, & taxpayer protection

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Some observations on the plan announced by Treasury Secretary Tim Geithner yesterday:

 

Clearly we need to hear more details.   I  sympathize with Geithner, who has only been in office a couple of weeks.    He has had to take over in the middle of the worst financial crisis in 77 years, at the same time that he must personally fill out the reams of forms that it takes to get confirmed by the Senate (like all such new appointees)  and to fill lots of positions throughout the upper levels of the Treasury.    But the American public will demand further elaboration  on his plan soon. read more

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Stop Distorting Spending Priorities into Tax Cuts

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It is unfortunate that much of the congressional debate regarding the stimulus package is phrased in terms of a summary statistic: what fraction of the stimulus is to be increased spending and what fraction is to be tax cuts. It currently looks to be about 70-30, but the Republicans say they want more in tax cuts and the Democratic holdouts say they want more in spending.

To judge the merits, one has to go into greater detail.

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Advice for the New Administration: Spend Green Today, Tax Green in the Future

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Politicians are often tempted to think that a policy to help one goal, say air quality, must also help lots of other goals, say economic growth.  Economists are more likely to presume tradeoffs, and to use the principle of targets and instruments.  That principle says that you cannot expect to hit more than one bird with one stone, except by coincidence.

At the American Economic Association meetings in San Francisco, January 3, I was on a panel titled “Energy and the Environment: Policy Advice for the New Administration” (along with some real energy experts; I am a relative latecomer to the area).  Within the framework of targets and instruments, I proposed a matrix such as the one that appears below. read more

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