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Mike Munger is the chair of the Political Science Department and a professor of economics at Duke University. He is also North American editor of the journal Public Choice.
1. How bad is the current market situation?
Very short term credit markets are in bad shape although bank credit has so far managed to stay high albeit with declining growth rates.
2. How bad are the current proposed bailout
The disaster is not so bad that more thought about what to do would not be beneficial.
3. What's the one thing we should be doing that we're
To avoid a credit crunch we should be encouraging savings. I propose a temporary but strong stimulus to savings which could be implemented by a) making the Roth IRA tax deductible for a year and eliminating the income limits and b) eliminating for a period of time any taxes on interest. Increased long-term savings will help to alleviate the credit crisis by providing funds and reducing the maturity mismatch which is creating liquidity problems. In addition, long term savings are good for economic growth.
Alex Tabarrok, Associate Professor of Economics at George Mason University writes regularly at MarginalRevolution.com.