The Bush tax cuts should be extended permanently for families with annual incomes of less than $250,000 and should be phased out slowly for those making more than that. Raising taxes on anyone now, when the economic recovery is so fragile, would be a mistake.

The clearest way to cut some of this fiscal drag would be to extend the current payroll tax holiday and increase it - as proposed by President Barack Obama. This would cut the fiscal drag by almost half.

Past experience with fiscal austerity at home and overseas strongly suggests that it is best for the economy's long-run performance to restrain government spending rather than raise taxes.

Mark Zandi Quotes