Mundell On How to Nosedive

Like any other line of work, the economics profession has a bent to declare its "young stars" in order to recognize the younger generation and let the world know (or make them think) that the profession is dynamic and exciting. These are essentially, hard-working, ambitious types who play well to the incentives placed before them. In academia those incentives are to publish papers, lean to the left politically, and give some scientific gloss to policy that expands the role of government. As you would expect, the Obama campaign has a bunch of these young stars in his camp. The thing is, these young stars are essentially policy neophytes - their economics are untested and their experience in the world of policy is limited - and most will turn out to have little or no impact on their profession or their profession's role in our society. It is likely this reality that led the WSJ to title its weekend profile of Robert Mundell, "An Economist Who Matters" in order to remind us that the old sages are still among us.

What does Nobelist Mundell think will happen if the current dividend, capital gain, and marginal income tax rates are allowed to expire, meaning rise? "If that happens," Mr. Mundell predicts, "the U.S. will go into a big recession, a nosedive."