Brad DeLong's Semi-Daily Journal: National SavingIn fact Mankiw's response is less direct than this. He leaves open the option of massive cuts in government services such as social security and medicare. DeLong is translating Mankiw's statement into something that's reality based.
... To summarize: Greg wants to: (i) raise taxes, (ii) cut government spending, and so (iii) balance the budget, (iv) shift the tax code to be yet more friendly toward savings, and (v) reform ERISA so that employer-sponsored defined-contribution pension plans are the default option rather than requiring opt-in. I would buy into all four of those, with a footnote about how (iv) needs to be implemented in a way that does not reduce progressivity and make America a yet more unequal place.
The comments are excellent. One comment notes that a consumption tax is a great way to punish those who save, especially those who save in tax deferred accounts. It makes a mockery of the 401K for example. Read the comments.
DeLong wants a progressive tax code, presumably Mankiw doesn't care about that as much ...