BY BENJAMIN KABAK

In print | October 7, 2004

Joseph Stiglitz, winner of the 2001 Nobel Prize in Economics, had a message for President George W. Bush: The much-heralded tax cuts did not work. In fact, according to Stiglitz, no economist would believe that the Bush tax cuts were designed to spur on the staggering United States economy.

On Monday, Stiglitz addressed a packed crowd in the Science Center lecture hall, preaching largely to the converted on “Economics and the Election.” For over an hour, Stiglitz railed on the Bush administration’s plans for economic recovery, saving his most acrimonious critique for Alan Greenspan, the chairman of the Federal Reserve.

For much of the evening, Stiglitz dissected the arguments in favor of the Bush tax cut. He began by debunking the current administration’s claims that the economy has actually grown over the past three years. While it is true that the economy has grown by about three percent a year since 2001, Stiglitz did not believe that this was significant growth. “Three percent is just running enough to stand still, and what we have been seeing is a rising unemployment rate,” he said. “The economy seems to reflect a choice of more unemployment and less growth.”

Moving on to the specifics of the tax cut, Stiglitz mocked the theory behind giving money back to only the richest in society. “It’s called trickle-down economics, and it’s not true,” he said. “It’s not true in the 80s, and it’s not true today.”

Following his critique of the tax cuts, Stiglitz laid the blame for America’s economics problems squarely on the Bush administration. Explaining the need for investing in research and development, Stilglitz noted how Bush’s tax cut did not provide for any long-term investments that would stimulate the economy in the future. “It was an achievement to provide so little stimulus,” he said.

Furthermore, Stiglitz noted that the United States was contributing to “enormous global financial instability” by borrowing nearly $1.5 billion a day from various global markets. With volatile exchange rates and a vulnerable economy, Stiglitz noted that American households were facing increasing bankruptcy rates and more indebtness. “It’s the world you are inheriting,” he said. “It’s not a rosy picture, and I doing think we’re about to turn the corner. That doesn’t look very good for Bush.”

In closing, Stiglitz issued his most blatant critique of the Bush strategy. “Tax cuts for the rich,” he said, “are not the solution to every economic policy.”

Following his speech, Stiglitz responded to numerous questions from the audience. Portraying more of his pro-John Kerry, pro-liberal bias, Stiglitz was quick to praise the Democratic presidential hopeful’s economic plan. “Kerry’s economic policies would remedy much of the problems I described,” he said. “There are some losers in this change, but I think economic performance would be enhanced.”

Finally, Stiglitz saved his harshest critique for an attack on Greenspan. Responding to a question about Greenspan’s inconsistent economic positions over the years, Stiglitz launched into an attack against the chair of the Federal Reserve. “The arguments Greenspan made were among the worst I’ve ever heard from a public official,” he said.

Greenspan, Stiglitz noted, had said that a zero-deficit situation would have been bad for the American economy. “Congress would have found a way in this emergency to get the debt up again,” Stiglitz responded, with a hint of sarcasm in his voice. “Greenspan has a very partisan and political agenda: Downsize the government. By encouraging deficits, the tax cut and spending cuts, the agenda seems to be perfectly clear.”

Following the speech, economics professor Bernard Saffran praised Stiglitz for his delivery. “It was obvious what side he was on, but I thought he was trying to represent his own views and not give a political diatribe,” Saffran said. “It wasn’t a partisan speech.”

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