America's economy is heading for a major slowdown. The occurrence or a recession-two quarters of negative growth is not important. More important is the fact that the economy will operate below its potential, increasing unemployment. The country needs a stimulus, but anything we do will increase our soaring deficit, so it's important to get as much bang for the buck as possible. The optimal package would contain one fast-acting measure along with others that could lead to increased spending if and only if the economy goes into a steep downturn.
should begin by strengthening the unemployment insurance system, because money received by the unemployed would be spent immediately.
The federal government should also provide some assistance to states and municipalities, which are already beginning to feel the need to tighten their belts, as the value has fallen property. As expected, they respond by cutting spending, which acts as a destabilizing factor. Federal assistance should come in the form of aid for rebuilding crucial infrastructure.
Increased federal support for state education budgets would also strengthen the economy in the short term, and promote growth in the long run, as would spending to promote energy conservation and lower emissions. Of course, implementing a well-designed programs of public expenditure of this kind would take some time, but all indications are that this recession will last longer than the keep others in recent memory. The housing prices will soon return to normal levels, and if Americans start saving more money than they have been doing, consumption could remain low for some time.
The Bush administration has long taken for tax cuts (especially permanent tax cuts for the rich) as a solution to the problem. This is incorrect. Tax cuts perpetuate the excessive consumption that has characterized the U.S. economy. But Americans of middle and low incomes have suffered in the last seven years: the median family income is lower today than it was in 2000. A tax rebate aimed at middle-income households and low would make sense, especially since it would quickly into the economy.
Something should be done about foreclosures, and appropriately designed legislation that would allow victims of predatory lending to stay in their homes would stimulate the economy. But we should not spend much money on this. Otherwise, it would only lend a hand to his troubles out investors, and they are not the only ones who need help from taxpayers.
In 2001, the Bush administration used the impending recession as an excuse for tax cuts for higher-income Americans (who was exactly the same group that had benefited economically in the preceding quarter-century.) The cuts intended to stimulate the economy, and only did so to some extent. To keep the economy running, the Federal Reserve was forced to lower interest rates to unprecedented levels, and then look the other way as America plunges by derrocaderos of irresponsible lending.
Time of reckoning. And what is now needed is a stimulus that stimulates. The question is, will the president and Congress politics aside to get to work on it?
Joseph Stiglitz is professor of economics at Columbia and winner of the Nobel Prize in Economics.
should begin by strengthening the unemployment insurance system, because money received by the unemployed would be spent immediately.
The federal government should also provide some assistance to states and municipalities, which are already beginning to feel the need to tighten their belts, as the value has fallen property. As expected, they respond by cutting spending, which acts as a destabilizing factor. Federal assistance should come in the form of aid for rebuilding crucial infrastructure.
Increased federal support for state education budgets would also strengthen the economy in the short term, and promote growth in the long run, as would spending to promote energy conservation and lower emissions. Of course, implementing a well-designed programs of public expenditure of this kind would take some time, but all indications are that this recession will last longer than the keep others in recent memory. The housing prices will soon return to normal levels, and if Americans start saving more money than they have been doing, consumption could remain low for some time.
The Bush administration has long taken for tax cuts (especially permanent tax cuts for the rich) as a solution to the problem. This is incorrect. Tax cuts perpetuate the excessive consumption that has characterized the U.S. economy. But Americans of middle and low incomes have suffered in the last seven years: the median family income is lower today than it was in 2000. A tax rebate aimed at middle-income households and low would make sense, especially since it would quickly into the economy.
Something should be done about foreclosures, and appropriately designed legislation that would allow victims of predatory lending to stay in their homes would stimulate the economy. But we should not spend much money on this. Otherwise, it would only lend a hand to his troubles out investors, and they are not the only ones who need help from taxpayers.
In 2001, the Bush administration used the impending recession as an excuse for tax cuts for higher-income Americans (who was exactly the same group that had benefited economically in the preceding quarter-century.) The cuts intended to stimulate the economy, and only did so to some extent. To keep the economy running, the Federal Reserve was forced to lower interest rates to unprecedented levels, and then look the other way as America plunges by derrocaderos of irresponsible lending.
Time of reckoning. And what is now needed is a stimulus that stimulates. The question is, will the president and Congress politics aside to get to work on it?
Joseph Stiglitz is professor of economics at Columbia and winner of the Nobel Prize in Economics.
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