Nobel laureate economist Joseph Stiglitz says tax cuts won’t help solve our economic woes.
“The problem with tax cuts is that the bang for the buck is very low,” he says in an interview with the Financial Times.
“In the February 2088 tax cut … only about 40 percent of the money given has been spent. So it doesn’t stimulate the economy much.”
Given the country’s burgeoning debt load, “it is imperative that we be sure that we get value for money,” Stiglitz says.
U.S. debt now totals $11.2 trillion, or 79 percent of the $14.1 trillion GDP, according to Bloomberg data.
“In this context (we need) bang for the buck,” he says. “And unfortunately it looks like we won’t be doing that.”
Stiglitz says consumers’ increased thrift is actually hurting the economy.
“Americans, with this huge overhang of debt, with the large uncertainties, with the drying up of credit markets are deciding quite rationally not to spend money,” he points out.
“That’s good for their balance sheets, but in terms of bang for the buck, it’s very bad.”
Stiglitz blames banks for much of our predicament. Financial markets “were supposed to manage risk and allocate capital,” he says. Instead, “They created risk and misallocated capital.”
In economist Arthur Laffer’s eyes, Stiglitz doesn’t have much to worry about on taxes.
Our huge debt “all but guarantees higher interest rates, massive tax increases, and partial default on government promises,” Laffer writes in The Wall Street Journal.
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