Greg Mankiw on the Democrat-Republican compromise over taxes

I am generally pleased with the compromise over taxes the President and Republicans struck yesterday. (The President should be too, but he seemed dejected at his news conference. Buck up, Mr President! You don't want anyone to start thinking of the word "malaise.")

One aspect of the deal struck me as worth discussing with econ students: The compromise includes a one-year cut in the payroll tax by 2 percentage points. The tax cut will be entirely in the employees' share. Why do you think they designed the policy in this way? Was it the right choice?


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