[PAA-Discuss] Stiglitz calls for second fed stimulus

[Lee Loe]

Published on Friday, October 1, 2010 by BusinessJournalism.org
Stiglitz: More Stimulus Now or Economic Pain Will Endure

Nobel Prize-Winning Economist Joseph Stiglitz Calls for Second Federal
Stimulus


by Linda Austin

NEW YORK - Nobel Prize-winning economist Joseph Stiglitz called for another
round of federal stimulus dollars to spur the economy. He spoke Sept. 30 to
the Society of American Business Editors and Writers (SABEW) at its Fall
Workshop.

Nobel Prize-winning economist Joseph Stiglitz called for a second round of
federal stimulus spending in a New York speech to the Society of American
Business Editors and Writers. (BusinessJournalism.org)
"We will see in the next two years the real cost of there not being a second
round of stimulus," he said. "We will see the economy slow down at a very
high economic cost." 

The Columbia University professor also said that the "new normal" as far as
the unemployment rate is concerned may not be the 4 to 5 percent that
existed before the financial crisis in 2008, but more like 7 to 8 percent.

Unemployment is about 9.5 to 9.6 percent officially, he said, but many
people who are working part-time involuntarily or who have stopped looking
but want work are not counted in the official rate.

Congress passed the first stimulus on Feb. 11, 2009, approving a $787
billion bill, the American Recovery and Reinvestment Act.

He said one reason that stimulus has not had more effect is that state and
local governments have cut spending, undoing about one-half of the impact of
the money that the feds have injected.

He said the stimulus also could have had more effect if more money had been
put into making up for the shortfalls of state budgets, stopping layoffs; if
less had been put into tax cuts that wary consumers just ended up saving;
and if safeguards to prevent waste had not slowed the money from being
spent.

Still, he said, "The stimulus absolutely worked." Without it, unemployment
could have peaked at more than 12 percent.

He said that one-fourth of Americans have negative equity in their homes,
meaning that they can't draw on their homes as a piggybank to borrow and
live beyond their means. In fact, they are going to have to live below their
means to pay off debt accumulated during better times.

"We likely face a marked reduction in standard of living," he said.

C 2010 BusinessJournalism.org
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Article printed from www.CommonDreams.org

URL to article: http://www.commondreams.org/headline/2010/10/01-8
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