I don’t know if Greg Mankiw agrees with Ed Lazear, but this post features the latter saying something interesting about the trade deficit:

I would like to point out the historic record suggests that countries can be in a current-account deficit or a surplus situation for very long periods of time. New Zealand and Australia have had deficits for decades. Australia in particular has been running a current account deficit that has created a level of foreign indebtedness equal to about 72 percent of their GDP, whereas our foreign indebtedness was only about 21 percent of GDP in 2004 (most recent available published data). Yet, the Australian economy has been very strong and growing at robust rates over the past decades. Australia’s real GDP has grown at an average rate of 3.5 percent over the last decade.

Don’t put Lazear in the Don Boudreaux camp, however:

There is no clear correlation between a country’s surplus or deficit and economic growth. Given the lack of obvious correlation, should we still be concerned about a large current account deficit? We should still be concerned. We must constantly monitor our international situation for the reason that abrupt changes could create problems for the U.S. economy.

On the other hand…

In particular, a rapid decline in the U.S. current account deficit would correspondingly imply a rapid decline in the U.S. capital account surplus. Were this to happen, there could be significant adverse consequences to the U. S. economy and to the rest of the world. We do not anticipate abrupt changes like this occurring.

UPDATE: Brad DeLong notes the difference between the current account deficit and the trade deficit, and the implications for sustainability. Read his post. I’d feel bad for making that error, but so did Greg Mankiw.