Agree with just about everything here. This looks like a solid plan, with almost everything justified; but it should be only part of building back better — the really high-return public investments are probably in people, especially children 1/
Also very much agree that the case for a full pay-for via taxes is weak, given extremely low real interest rates, which are a triple reason to spend: we can afford it, private sector doesn't see high returns, and it means that we need to worry about secular stagnation 2/
Real interest rate over time (using previous 3-year core inflation) 3/
But Biden team knows all this. If they can pass tax increases linked to physical infrastructure, this creates space for being relaxed about budget implications of child care etc initiatives 4/
Gotta say I really like Greg Sargent's phrase "forward-looking nostalgia". Big infrastructure is an American tradition, from the Erie Canal to the Interstate Highway System.5/…
Republicans gonna Republican, shouting "job-killing" and "socialism." Biden team should hope they keep it up — this plays well to their faithful, but not with the rest of the country 6/
In a way, Biden is positioning himself as a greener Dwight Eisenhower, on both spending and taxes. Not a bad place to be ... 7/

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More from @paulkrugman

1 Apr
Having a bit of fun delving into the history of infrastructure spending. Q: how big a deal was the Erie Canal? It cost $7 million, which sounds trivial. 1/ Image
But the US economy was vastly smaller then than it is now, and prices were much lower. This may have been almost 1% of a year's GDP, the equivalent of ~$200 billion today 2/…
And this was a state, not a national project. As a share of New York's GDP, it was probably the equivalent of a national project > $1 trillion today 3/
Read 4 tweets
1 Apr
This attack might have a smidgen of credibility if the Trump tax cut had actually caused corporations to bring money back to America and invest more 1/…
But it didn't. 2/…
As a result, Trump's tax cut was basically a giveaway to stockholders — and foreigners own 40 percent of US equities 3/…
Read 5 tweets
29 Mar
This is preliminary, and probably being floated in part to get reactions. But for what it's worth, it sounds as if the Biden plan will be too deficit-averse 1/…
The stimulus from the American Rescue Plan will be largely in the rear-view mirror by the time infrastructure ramps up; we'll probably be back in an environment of weak demand and low interest rates 2/
Under those conditions sustained deficit spending on investment is actually good — which was the case Larry Summers was ably making before he began his crusade against the ARP 3/
Read 5 tweets
24 Mar
What is Yellen talking about here? Look at the data 1/
Was there any break in the trend in business investment after a very large tax at end 2017? No 2/
Real nonresidential fixed investment ex mining (which is noisy because of oil price/fracking stuff) 3/
Read 4 tweets
24 Mar
So actually I think Noah, unusually, has this mostly wrong. These macro wars are very different from those of 2011; the debates are about numbers, not principles — basically because the big conceptual issues were settled when one side won 1/…
This time we really are all Keynesians now — or at any rate nobody is listening to the people who insisted austerity is expansionary, all unemployment is structural, etc. Summers, Blanchard, Yellen and yours truly are working in pretty much the same framework 2/
And that framework is IS-LM-ish macro, where deficit spending is expansionary at a given interest rate. The question is how expansionary. And that's a subject for dispute mainly because we are in uncharted policy territory 3/
Read 6 tweets
24 Mar
As Biden moves toward Phase 2, infrastructure spending paid for in part by taxes on the rich, he'll once again be doing very much what the public wants. Infrastructure is very popular 1/…
So are higher taxes on the rich 2/…
So when Democrats give in to the 70-80% of voters who think we should be spending more on infrastructure, th 62% who think the rich should pay more taxes (69% say the same about corporations), will they be lambasted for not being bipartisan? 3/
Read 4 tweets

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