NEW YORK — 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.”
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
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.
Congress passed the first stimulus on Feb. 11, 2009, approving a $787 billion bill, the American Recovery and Reinvestment Act.
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He said one reason that stimulus has not had more effect is that
state and local governments have cut spending, undoing about one-half of
the impact of the money that the feds have injected.
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.
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.