Friday, May 13, 2011

Stiglitz: Increase Spending to Reduce Deficit

You have to five Joseph Stiglitz credit for being a hardcore Keynesian. The man wants to cut the deficit by increasing spending (along with some additional taxes on the "rich"). is relatively easy to formulate a deficit-reduction package that boosts efficiency, bolsters growth, and reduces inequality. Five core ingredients are required. First, spending on high-return public investments should be increased. Even if this widens the deficit in the short run, it will reduce the national debt in the long run.
What is Stiglitz talking about when he says "high-return public investments"?  If there really were any "high-return" sectors, the private sector would be all over them.
As for his raising of taxes, his favorite seems to be the capital gains tax:
Creating a fairer and more efficient tax system, by eliminating the special treatment of capital gains and dividends, is also needed. Why should those who work for a living be subject to higher tax rates than those who reap their livelihood from speculation (often at the expense of others)?
This shows that Stiglitz has no understanding of the importance of capital formation in raising the standard of living in a country. The last thing you should do is increase the tax on capital. Also, note how he couches this in terms of a "fairer and more efficent tax system". Remember, keep the current structure and lower the rates from the current structure, changing the structure to make it fairer only means higher taxes.


  1. There's a saying, "Adversity doesn't build character, it reveals it."

    We could modify that saying slightly to arrive at a nostrum more applicable to our friend, Mr. Stiglitz:

    "Economic crises don't turn people into Marxists, they reveal them as such."

    The worse this global economic fiasco has gotten, the more forthright Stiglitz has been about his true economic ideas, namely, that he is an adherent of the Marxian exploitation theory.

    This is kind of like when someone everyone has always suspected of being a racist finally screams out some uncouth, insensitive remark in a moment of extreme anxiety involving a person of another race. At this point, he only has his own reputation to destroy, not that of the free market or those who support it.

    In that sense, I wish Mr. Stiglitz the best of luck in his endeavors!

  2. Stiglitz supports the worker, Comrade!

  3. I love how he is so certain that spending money on what ever high value projects are deemed to be, will in the long run reduce the debt. Since when in the last 80 years has that happened? If the government found someway to turn lead into gold, the debt would still never get paid down. Instead government would take 80% of revenue from the gold making and reward themselves while the politicians would use the remaining 20% plus what ever they can borrow to buy votes from the public. Even my 7th grader could call Stiglitz out on this idea. This man is a con man for the government.

  4. "Why should those who work for a living be subject to higher tax rates than those who reap their livelihood from speculation (often at the expense of others)?"

    *salutes his comrade*

    Nah, just kidding. How is it he makes his living as an economics professor when a) he doesn't understand the subjectivity of value b) he thinks "work" and not value contributed to consumers is what should be rewarded and c) he knows fuck-all about "speculation", as if it -doesn't- involve things like foresight?

  5. Anon,

    Stiglitz: "But my model says...!"

  6. All Americans WILL be paying higher taxes, or else there will not be an America. It's that simple. The deficit problem will require huge spending cuts, and it will require higher taxes. Get used to the idea, or else start stockpiling sand bags, guns, ammo, food and water. THERE ARE NO OTHER OPTIONS IF OUR NATION IS TO SURVIVE.

    Our nation has had much higher taxes in the past while simultaneously having a growing economy. I'll pay higher taxes to avoid a total collapse and so will you, because you have NO OTHER OPTION.