IT TAKES A VILLAGE

The Wall Street Journal is reporting that economist Jeffrey Sachs is placing much of the blame for the economic meltdown on Alan Greenspan, former Chair of the Federal Reserve. According to Sachs:

The essence of the current downturn is finance ... It’s a Wall Street crisis. A crisis made down the block ... if you look under the rubble you can figure out what happened and why.

While Sachs is simply the latest among many to place the blame for our current economic mess on Alan Greenspan's shoulders, it should also be noted that giving tax cuts to the rich to grow the economy also played a crucial role. For this reason part of the blame must also go to Greg Mankiw.

So who's Greg Mankiw?

At the time he was hired by the Bush administration to sit on his Council of Economic Advisors he was a Harvard economist. For me this was an interesting choice because in one of his textbooks he had written that depending on tax cuts for the rich to grow the economy - a.k.a. supply-side economics - was a "crank theory." Still, as a member of President Bush's Council of Economic Advisors Professor Mankiw had a change of heart and provided some of the intellectual muscle for President Bush to ... drum roll please ... push for tax cuts for the rich to grow the economy, and create jobs (Mankiw's also known for making comments about "good genes" and success, but that's another matter).

So, how did the tax cuts work out? Check out this tax cuts-jobs chart:

After President Bush signed off on the first round of massive tax cuts for the rich (EGTRRA, enacted in mid-2001) and then the second round (EGTRRA, enacted in 2003; see analysis here) it's clear that tax cuts did nothing for job growth (red line) in America. All it did was wipe out projected budget surpluses, and transfer projected trillions in surplus wealth to America's wealthiest class.

Indeed, Mankiw was among the experts - which included Alan Greenspan - who said that the surpluses left by President Clinton might actually make things worse in the long run, especially if we paid down the debt too fast. Imagine that.

Jeffrey Sachs might be correct in pointing to Alan Greenspan as the maestro behind our economic mess. Still, it took a village, which included people like Greg Mankiw, to really screw things up.

- Mark