Wednesday, January 23, 2008

Stiglitz explains how to stop the economic downturn

Joseph E. Stiglitz, 2001 Nobel prize winner, a professor of economics at Columbia and the author, most recently, of “Making Globalization Work,” has written a short, but excellent article describing the kind of economic stimulus policies that would be most effective.

He writes:

The country needs a stimulus, but anything we do will add to our soaring deficit, so it is important to get as much bang for the buck as possible...

In 2001, the Bush administration used the impending recession as an excuse to cut taxes for upper-income Americans — the very group that had done so well over the preceding quarter-century. The cuts were not intended to stimulate the economy, and they did so only to a limited extent. To keep the economy going, the Federal Reserve was forced to lower interest rates to an unprecedented extent and then look the other way as America engaged in reckless lending. The economy was sustained on borrowed money and borrowed time.

The day of reckoning has come. This time we need a stimulus that stimulates. The question is, will the president and Congress put aside politics to get the job done?

Read the entire article, "How to Stop the Downturn."