Fearless Leader
Rethinking Alan Greenspan's Role in the 2001 Bush Tax Cut

Yet More Caccianli i Ciel per Non Esser Men Belli,/ Né lo Profondo Inferno Li Riceve... Blogging

There are demands in my email inbox that I talk about Greg Mankiw on "the ethics of advising"...

As I read it, Greg Mankiw says that you cannot infer from his relative silence that he supports George W. Bush's economic policies like the 2001 tax cut or the unfunded Medicare Part D:

Greg Mankiw's Blog: On the Ethics of Advising: I worked as an adviser to George Bush. Now I work as an... adviser to Mitt Romney.... [S]ome... presume that I must agree with, or be responsible for, every position they take. That is a deeply silly assumption.... [P]oliticians listen to many advisers with different points of view. An adviser cannot resign in protest every time a decision fails to go the way he advised. The system could not function if people acted in such a self-centered way.... In my book, the adviser is responsible [only] for the advice she gives...

That is an OK position to hold. It is not a great position to hold: it confuses "advice" and "support." But it is not a clearly wrong position.

It does, however, carry the implication that it is then legitimate to read silence as dissent: that if Greg Mankiw agreed with any of the policies coming out of the Bush White House he would be an enthusiastic cheerleader for them.

And here is the problem, for Mankiw also says that you cannot infer his opposition to policies from his lack of enthusiastic support for them. Indeed, he even claims that you cannot infer that he opposes Republican policies even he calls their major advocates "charlatans and cranks." Consider Bush's 2001 and Reagan's 1981 tax cut: the main argument for the cuts (that because they would not lower but raise revenue they would not risk the creation of large structural deficits) was the one made by those Mankiw explicitly labels "charlatans and cranks." But, says Mankiw, you cannot say he opposed the tax cuts--there might have been other reasons to support them that outweighed the risks that they would create large structural deficits:

Greg Mankiw's Blog: On Charlatans and Cranks: I used the phrase "charlatans and cranks" in the first edition of my principles textbook to describe some of the economic advisers to Ronald Reagan, who told him that broad-based income tax cuts would have such large supply-side effects that the tax cuts would raise tax revenue. I did not find such a claim credible, based on the available evidence. I never have, and I still don't.

The book made clear that the critique applied to a particular reason to favor the tax cuts, not necessarily to the policy of cutting taxes. There are many reasons a person might favor tax cuts besides the belief that tax cuts are self-financing. I hope it is not too pedantic to point out that there is a big difference between rejecting a policy and rejecting one argument made by some proponents of the policy...

Mankiw continues his support--excuse me, his non-non-support--of the Bush 2001 tax cut in spite of the fact that as rock-ribbed a Randite conservative as Alan Greenspan says that he thought at the time and thinks now that they were a bad idea: that there were no other reasons to support them that outweighed the risks that they would create large structural deficits:

Ron Suskind: [On] May 22 [2001]... [Federal Reserve Chair Alan] Greenspan arrived at the Treasury for breakfast with [Treasury Secretary Paul] O'Neill.... Greenspan said that wasn't enough. "Without the triggers [revoking the tax cut if the budget swings into deficit], that tax cut is irresponsible fiscal policy," he said in his deepest funereal tone. "Eventually, I think that will be the consensus view"...

And Mankiw continues his support--excuse me, his non-non-support--of the Reagan 1981 tax cut in spite of the fact that by the beginningh of 1982 the rock-ribbed Republicans who made up his economic policy staff and the Republican congressional leadership *(save Jack Kemp) unanimously agreed that it had been a substantial policy misstep and needed to be rolled back: that there were no other reasons to support them that outweighed the risks that they would create large structural deficits:

Ronald Reagan's Diary: Thur Dec 22 1981: A budget meeting. We've finally come together on the [spending] cuts--probably won't get all we ask for from Congress.... [M]y team is pushing for a tax increase to help hold down the deficits. I'm being stubborn. I think our tax cuts will produce more revenue by stimulating the economy. I intend to wait and see more results.... Mon Jan 11 1982: Repub. House leaders came down to the W.H.--Except for Jack Kemp they are h--l bent on new taxes and cutting the defense budget. Looks like heavy year ahead.... Wed Jan 20 1982: The day however was a tough one. A budget meeting and pressure from everyone to give in to increases in excise taxes.... I finally gave in but my heart wasn't in it...

Now, as I have said before, the only appropriate thing to do when confronted with something like this is to quote from an Italian poet of the thirteenth century:

Questo misero modo/ tegnon l'anime triste di coloro/ che visser sanza 'nfamia e sanza lodo./ Mischiate sono a quel cattivo coro/ de li angeli che non furon ribelli/ né fur fedeli a Dio, ma per sé fuoro./ Caccianli i ciel per non esser men belli,/ né lo profondo inferno li riceve...

Every one of his words rings true and glows like burning coals: This is indeed the behavior of the banner-chasers of Dante's Inferno: those who did not have the morals to be worthy of heaven but also lacked the guts to sin enough to be worthy of hell, and who were thus rejected by both.

My take is that Mankiw wants to be (a) an economist, and (b) someone useful enough to the Republican power structure to be granted White House mess privileges in the future. The first requires that he dissent from the idiot supply-side and other orthodoxies of the Republican Party today. The second requires that his dissents be private, internal, measured, and never call any attention to themselves.

I do not envy him.

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