Paul Krugman, the Nobel prize winning economist, and Greg Mankiw, chair of the Council of Economic Advisors under George W. Bush, are probably the most influential public intellectual economists in America from the left and the right respectively. The two take different-sides on the question of how effective the Obama stimulus will be and Mankiw is now challenging Krugman to put his money where his mouth is:
“Team Obama says that real GDP in 2013 will be 15.6 percent above real GDP in 2008. (That number comes from compounding their predicted growth rates for these five years.) So, Paul, are you willing to wager that the economy will meet or exceed this benchmark? I am not much of a gambler, but that is a bet I would be happy to take the other side of (even as I hope to lose, for the sake of the economy).”
The Obama team has taken some steps to return to ‘honest budgeting’ by cutting the AMT tax out of the Budget numbers and including costs for the wars in Iraq and Afghanistan. But the growth projections are, to be generous, best case scenarios. It seems almost recklessly optimistic to think that US GDP will be 15.6 percent larger in five years time.