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The Millennial generation faces economic challenges that other American generations have not. I interviewed Mark Thoma about concerns pertinent to the Millennial generation. Who is Mark Thoma:
Mark A. Thoma is an associate professor of economics at the University of Oregon. He joined the UO faculty in 1987 and served as head of the economics department for five years. His research involves the effects that changes in monetary policy have on inflation, output, unemployment, interest rates and other macroeconomic variables, and he has conducted research in other areas, such as the relationship between the political party in power and macroeconomic outcomes. He received his doctorate from Washington State University. He writes one of the top economics' blogs, Economist's View.
1. The Millennial generation (1980 to 1995) faces some challenges that its parents didn't face. What thee major economic challenges do you see for the Millennial generation?
The availability of good middle class jobs, the availability of health care and retirement benefits as employers increasingly stop offering these benefits to workers, and how to reduce our long-term debt load.
2. What action - if any - from political leaders and/or the Federal Reserve should be taken in order to assist in alleviating those economic challenges that the Millennial generation will face?
The longer run issues are mostly up to Congress to resolve. The Fed's job is to offset short-run movements in the economy, and to make sure inflation, etc. is under control so that long-run growth is as high as possible.
My main worry is what will happen to workers who used to be able to find long-term stable employment with reasonably good benefits, but will have more trouble doing so in a global economy. Policymakers need to do everything they can to support middle-class employment, to make sure health care remains available as employer continue to reduce this benefit, and to devote more resources to education to make sure workers are as competitive as possible in the world economy.
3. There's been some talk about eliminating the mortgage interest deduction. While it's possible this may not occur, what would be the economic effects of this if it goes through?
When there are market failures, these types of policies can be used to overcome them. However, the mortgage interest rate deduction does not overcome any obvious market failure and hence it distorts the choice of housing relative to a world where such an exemption does not exist. Thus, eliminating the deduction would remove the distortion and produce a more efficient outcome. The deduction is also highly regressive, so removing it is also a progressive way to bring revenue to the government.
4. The United States faces a huge deficit, and some politicians are still talking about cutting taxes. Is cutting taxes a wise idea and if not, what would be some useful tax changes that would help with this major deficit?
Tax cuts do not increase revenue. It can happen in theory, but in practice this isn't observed. Rather than cutting taxes we need to raise them ad to do so in a way that reduces inequality, i.e. raise taxes for those who can afford to pay them.