Glenn Hubbard, former Chairman of the Council of Economic Advisers under President George W. Bush, and Dean of Columbia Business School proposes:
….two policies are particularly promising for such a “Pact for America”: federal infrastructure spending and corporate-tax reform. Enactment of these reforms would generate a win for each side – and for both.
But such a bipartisan consensus requires removing both the left and the right’s ideological blinders, at least temporarily. On the left, a preoccupation with Keynesian stimulus reflects a misunderstanding of both the availability of measures shovel-ready projects and their desirability whether they will meaningfully change the expectations of households and businesses. Indeed, to counteract the mindset forged in the recent financial crisis, spending measures will need to be longer-lasting if they are to raise expectations of future growth and thus stimulate current investment and hiring.
The right, for its part, must rethink its obsession with temporary tax cuts for households or businesses. The impact of such cuts on aggregate demand is almost always modest, and they are poorly suited for shifting expectations for recovery and growth in the post-financial-crisis downturn….
Read more at A Growth Pact for America by Glenn Hubbard – Project Syndicate.