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Archive for May 9th, 2011

I don’t typically praise the work of Nobel Prize-winning economists, and even less often two in the same day.  But Paul Krugman’s op-ed in today’s NY Times is worth the read, and reinforces the Stiglitz interview (below). 

“These days Americans get constant lectures about the need to reduce the budget deficit. That focus in itself represents distorted priorities, since our immediate concern should be job creation. But suppose we restrict ourselves to talking about the deficit, and ask: What happened to the budget surplus the federal government had in 2000?

“The answer is, three main things. First, there were the Bush tax cuts, which added roughly $2 trillion to the national debt over the last decade. Second, there were the wars in Iraq and Afghanistan, which added an additional $1.1 trillion or so. And third was the Great Recession, which led both to a collapse in revenue and to a sharp rise in spending on unemployment insurance and other safety-net programs.”

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Joseph Stiglitz was interviewed this morning on NPR’s “Morning Edition.”  It’s worth the 7 minutes and 48 seconds to listen, but here’s my summary: 

“The Most important thing for addressing the deficit is putting America back to work,” economist Joseph Stiglitz said this morning in an NPR interview.

Instead of obsessing about deficit reduction, we need to invest in education and infrastructure, which will promote growth and lead in time to higher tax revenues.

As an example, the former Clinton administration official and Nobel Prize winner recalled that government engineers had proposed fixing the levees that protect New Orleans in 2000. They were ignored, until Katrina hit and the floods wiped out large parts of the city. “If we had made that few billion dollar investment we would have saved a couple hundred billion dollars.”

“If we go into mindless austerity,” Stiglitz said, “our deficits are not going to go down as fast as those people who argue for it claim.” Instead, cutbacks will weaken the economy, tax revenues will go down, more people will be unemployed, expenditures for unemployment insurance and welfare will go up, and we’ll be worse off than we are now.

You can’t ignore the deficit, Stiglitz said. “The real question is to address it in an intelligent way: invest in the future and grow the economy.”

Deficit obsession (my words, not his) is driven by ideology. The budget cuts are “designed to cut back on the core functions of government,” he said of the federal debate, but this point could be made about the New Hampshire state budget as well.

“There are some things that we really do need government for,” Stiglitz argued. Rich people can have big yards and live in gated communities, but “most people can’t afford that,” he said. That’s why we need public parks.

The debate should be over what government does, not its size, he concluded. “That’s what we need to have a national conversation about.”

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