Joseph E. Stiglitz, winner of the 2001 Nobel Prize in Economics, and author of The Three Trillion Dollar War: The True Cost of the Iraq Conflict
“If nothing is done, this recession could linger for years” Barack Obama
Not everyone shares this dour outlook.
Nobel Prize winner and former White House economist Joseph E. Stiglitz said that “underlying forces” indicate that the U.S. economy will continue on a “downward trajectory” for 2009 and that grim trend will have grave consequences for the global economy.
The sinking fortunes of the bottom half of the population.
” … the financial crisis is only one of several crises facing the country: the underlying macroeconomic problem has been made worse by the sinking fortunes of the bottom half of the population,” Stiglitz wrote.
Those who would spend don’t have the money, and those with the money aren’t spending, he added.
“The point of reciting these challenges facing the world is to suggest that, even if Obama and other world leaders do everything right, the U.S. and the global economy are in for a difficult period. The question is not only how long the recession will last, but what the economy will look like when it emerges.”
Will it return to robust growth, or will we have a sclerotic recovery, as did Japan in the 1990s?
“Right now, I cast my vote for the latter, especially since the huge debt legacy is likely to dampen enthusiasm for the big stimulus that is required,” Stiglitz warned.
Not everyone shares this dour outlook, however. Senate Republicans have been pushing for a massive tax cut, in addition to the stimulus, and Obama has embraced the idea of a $300 billion tax cut.
“Our energized economy cannot occur without lower marginal tax rates,” notes Larry Kudlow, a conservative economist and CNBC talk show host, in his weekly column.
Some Republicans and conservative Democrats have expressed concern that the stimulus package could bust the federal budget with new programs that will require funding for years to come.
In the speech excerpts, Obama said the cost of the package of tax cuts and spending measures he is proposing would be “considerable” but that it was needed to keep the economy from sinking into a vicious cycle of weak consumer spending, job losses and a further tightening of credit markets.
In addition to the fiscal package, Obama urged further measures to shore up confidence in the financial system and restore smooth functioning of the frozen credit markets.
He vowed to move quickly to overhaul the Wall Street regulatory system and to crack down on “wrongdoers” who slip through regulatory cracks, in an apparent reference to the alleged $50 billion fraud scandal involving financier Bernard Madoff.
Obama said his administration would use the “full arsenal of tools to get credit flowing again.”
He also called for a stepped-up effort to prevent home foreclosures.
Text of Obama Speech on the Economy
AP Broadcast Business Editor Mark Hamrick reports on the outlook for the Labor Department’s December jobs report, due Friday. (Jan. 8)
Phil Berg Barack Obama Ron Polarik Jeff Schreiber