To the surprise of no one who’s paying attention to the American economy’s stall, Nobel Prize-winning economist Joseph Stiglitz yesterday called for a second federal stimulus, saying Americans face a significant reduction in standard of living because they no longer have home equity on which to borrow, spend, and live.
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.
“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.”
Additionally, he painted a terrifying picture of a ‘new normal’ of unemployment double the rate America had become used to in the 21st century:
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.
Additionally, he excoriated the tax-cut emphasis of the first federal stimulus and said its goals would have been accomplished much more easily without that emphasis:
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.
Finally, the picture he painted of the American standard of living shows that the Bush/Cheney economic collapse will be with Americans for a long time, despite the GOP’s claims in the past that the American standard of living was non-negotiable:
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.
This guy needs to be advising the President directly.