A successful argument for a government manufacturing policy has to go beyond the feeling that it's better to produce 'real things' than services. American consumers value health care and haircuts as much as washing machines and hair dryers.

Making labor less expensive helps firms hire people.

Our estimates suggest that a tax increase of 1 percent of GDP reduces output over the next three years by nearly 3 percent. The effect is highly significant.

A successful argument for a government manufacturing policy has to go beyond the feeling that it's better to produce 'real things' than services. American consumers value health care and haircuts as much as washing machines and hair dryers.

Tax increases appear to have a very large sustained and highly significant negative impact on output.

If every other store in town is paying workers $9 an hour, one offering $8 will find it hard to hire anyone - perhaps not when unemployment is high, but certainly in normal times. Robust competition is a powerful force helping to ensure that workers are paid what they contribute to their employers' bottom lines.

Tax increases appear to have a very large sustained and highly significant negative impact on output. Since most of our exogenous tax changes are in fact reductions, the more intuitive way to express this result is that tax cuts have very large and persistent positive output effects