Joseph E. Stiglitz's Blog

June 8, 2021

Does Joe Biden’s spending plan really risk high inflation?

We should expect price increases in the Covid recovery phase – and we have the tools to cool the economy

Slight increases in the rate of inflation in the United States and Europe have triggered financial market anxieties. Has Joe Biden’s administration risked overheating the economy with its $1.9tn (£1.3tn) rescue package and plans for additional spending to invest in infrastructure, job creation and bolstering American families?

Such concerns are premature, considering the deep uncertainty we still face. We have never before experienced a pandemic-induced downturn featuring a disproportionately steep service sector recession, unprecedented increases in inequality and soaring savings rates. No one even knows if or when Covid-19 will be contained in the advanced economies, let alone globally. While weighing the risks, we also must plan for all contingencies. In my view, the Biden administration has correctly determined that the risks of doing too little far outweigh the risks of doing too much.

Related: A shortage of workers is driving up wages: are we entering a new economic era? | John Harris

Related: Post-lockdown summer: Americans out for fun and with money to spend

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Published on June 08, 2021 04:00

February 1, 2021

Joe Biden's $1.9tn recovery package is vital – but we can debate the detail

Growth will generate tax revenues not just for federal government but for cash-starved states and cities

Joe Biden has proposed a $1.9tn (£1.4tn) rescue plan to help the American economy recover from the pandemic. Many Republicans oppose it, suddenly consumed with the fiscal religion they unceremoniously abandon whenever their party controls the White House. The massive tax cuts the GOP bestowed on billionaires and corporations in 2017 resulted in the highest US fiscal deficits on record, outside a deep recession or war. But the promised investment and growth never materialised.

By contrast, Biden’s proposed spending plan is urgently needed. Recently released data show a slowdown in America’s recovery both in terms of GDP and employment. There is overwhelming evidence that the recovery package will provide enormous stimulus to the economy, and that economic growth will generate substantial tax revenues, not just for the federal government but also for the states and municipalities that are now starved of the funds they need to provide essential services.

Related: Biden more likely to bypass Republicans on Covid stimulus aid after lowball offer

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Published on February 01, 2021 07:29

January 12, 2021

Is Donald Trump an aberration or a symptom of a deeper US malady?

The underlying causes of Trump’s rise to power must be addressed, from taming social media to tackling inequality

The assault on the US Capitol by Donald Trump’s supporters, incited by the president himself, was the predictable outcome of his four-year-long assault on democratic institutions, aided and abetted by so many in the Republican party. And no one can say that Trump had not warned us: he was not committed to a peaceful transition of power.

Many who benefited as he slashed taxes for corporations and the rich, rolled back environmental regulations and appointed business-friendly judges knew they were making a pact with the devil. Either they believed they could control the extremist forces he unleashed, or they didn’t care.

Related: Why the Democrats should not impeach Donald Trump | Simon Jenkins

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Published on January 12, 2021 04:11

October 3, 2020

How the Republican party threatens the US republic | Joseph Stiglitz

Without a big election victory for Democrats at all levels, Republican minority rule will be locked in indefinitely

Whereas Nero famously fiddled while Rome burned, US President Donald Trump has famously hit the links at his money-losing golf courses while California burns – and as more than 200,000 Americans have died of Covid-19 – for which he himself has now tested positive. Like Nero, Trump will undoubtedly be remembered as an exceptionally cruel, inhumane, and possibly mad political figure.

Until recently, most people around the world had been exposed to this American tragedy in small doses, through short clips of Trump spouting lies and nonsense on the evening news or social media. But in late September, tens of millions of people endured a 90-minute spectacle, billed as a presidential “debate”, in which Trump demonstrated unequivocally that he is not presidential – and why so many people question his mental health.

Related: Covid-19 and the climate crisis are part of the same battle | Jeffrey Frankel

Related: Why Joe Biden is better than Donald Trump for the US economy | Nouriel Roubini

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Published on October 03, 2020 00:00

How the Republican party threatens the US republic

Without a big election victory for Democrats at all levels, Republican minority rule will be locked in indefinitely

Whereas Nero famously fiddled while Rome burned, US President Donald Trump has famously hit the links at his money-losing golf courses while California burns – and as more than 200,000 Americans have died of Covid-19 – for which he himself has now tested positive. Like Nero, Trump will undoubtedly be remembered as an exceptionally cruel, inhumane, and possibly mad political figure.

Until recently, most people around the world had been exposed to this American tragedy in small doses, through short clips of Trump spouting lies and nonsense on the evening news or social media. But in late September, tens of millions of people endured a 90-minute spectacle, billed as a presidential “debate”, in which Trump demonstrated unequivocally that he is not presidential – and why so many people question his mental health.

Related: Covid-19 and the climate crisis are part of the same battle | Jeffrey Frankel

Related: Why Joe Biden is better than Donald Trump for the US economy | Nouriel Roubini

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Published on October 03, 2020 00:00

August 4, 2020

Letter from economists: to rebuild our world, we must end the carbon economy

The carbon economy amplifies racial, social and economic inequities, creating a system that is fundamentally incompatible with a stable future

From deep-rooted racism to the Covid-19 pandemic, from extreme inequality to ecological collapse, our world is facing dire and deeply interconnected emergencies. But as much as the present moment painfully underscores the weaknesses of our economic system, it also gives us the rare opportunity to reimagine it. As we seek to rebuild our world, we can and must end the carbon economy.

Related: Environmental racism is killing Americans of color. Climate change will make it worse | Mustafa Santiago Ali

This moment creates an opportunity to bring about a better future for ourselves and our children

This letter has been signed by more than 100 economists. See the full list of signatories here

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Published on August 04, 2020 06:09

August 2, 2020

A global debt crisis is looming – how can we prevent it? | Joseph Stiglitz

There is an urgent need for wide-ranging debt relief in the midst of the coronavirus pandemic

While the Covid-19 pandemic rages, more than 100 low- and middle-income countries will still have to pay a combined $130bn in debt service this year – around half of which is owed to private creditors. With much economic activity suspended and fiscal revenues in free fall, many countries will be forced to default. Others will cobble together scarce resources to pay creditors, cutting back on much-needed health and social expenditures. Still others will resort to additional borrowing, kicking the proverbial can down the road, seemingly easier now because of the flood of liquidity from central banks around the world.

From Latin America’s lost decade in the 1980s to the more recent Greek crisis, there are plenty of painful reminders of what happens when countries cannot service their debts. A global debt crisis today will push millions of people into unemployment and fuel instability and violence around the world. Many will seek jobs abroad, potentially overwhelming border-control and immigration systems in Europe and North America. Another costly migration crisis will divert attention away from the urgent need to address climate change. Such humanitarian emergencies are becoming the new norm.

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Published on August 02, 2020 23:00

July 12, 2020

Covid-19 is no excuse for sovereign creditors to move the goalposts on debt

Vulture funds want to change Argentina’s debt structure. We need to stop them from setting a dangerous precedent

In the wake of Covid-19, there is an urgent need for sovereign debt restructuring, including debt relief. In the circumstances caused by the pandemic, many countries’ repayment obligations could have devastating social consequences if they are not adjusted. Financial markets face risks of sovereign default.

While some ad hoc relief has already been promised by official creditors, indebted poor countries are again facing private creditors without a sovereign-debt restructuring mechanism – the global equivalent of a bankruptcy regime. In the absence of such a framework, called for by the United Nations General Assembly and advocated by many experts and stakeholders, there have nevertheless been some constructive innovations in contractual approaches to sovereign debt. These address at least some of the collective-action problems of restructuring, including opportunistic holdout behaviour.

Related: Invest in the green economy and we'll recover from the Covid-19 crisis | Joseph Stiglitz

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Published on July 12, 2020 22:00

July 2, 2020

Invest in the green economy and we'll recover from the Covid-19 crisis | Joseph Stiglitz

We must target public spending on green, labour intensive projects which have far more bang for their bucks than tax cuts

Although it seems like ancient history, it hasn’t been that long since economies around the world began to close down in response to the Covid-19 pandemic. Early in the crisis, most people anticipated a quick V-shaped recovery, on the assumption that the economy merely needed a short timeout. After two months of tender loving care and heaps of money, it would pick up where it left off.

It was an appealing idea. But now it is July, and a V-shaped recovery is probably a fantasy. The post-pandemic economy is likely to be anaemic, not only in countries that have failed to manage the pandemic (namely, the US), but even in those that have acquitted themselves well. The International Monetary Fund projects that by the end of 2021 the global economy will be barely larger than it was at the end of 2019 and that the US and European economies will still be about 4% smaller.

Related: The post-coronavirus economic recovery must be led by the US | Mohamed El-Erian

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Published on July 02, 2020 02:09

April 6, 2020

World must combat looming debt meltdown in developing countries | Joseph Stiglitz

If international community wants to avoid wave of Covid-19 defaults it needs to start rescue plan

As it spread from one country to another, the coronavirus paid no attention to national frontiers or “big, beautiful” border walls. Nor were the ensuing economic effects contained. As has been obvious since the outset, the Covid-19 pandemic is a global problem that demands a global solution.

In the world’s advanced economies, compassion should be sufficient motivation to support a multilateral response. But global action is also a matter of self-interest. As long as the pandemic is still raging anywhere, it will pose a threat – both epidemiological and economic – everywhere.

Related: Now the world faces two pandemics – one medical, one financial | Robert Shiller

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Published on April 06, 2020 23:00

Joseph E. Stiglitz's Blog

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