This article by Joseph Stiglitz, a Nobel prizing winning economist and professor of economics at Columbia University in New York City, is one of the best I’ve seen on what went wrong with the economy and what can be done about it by the Obama team. It appeared in the November Vanity Fair magazine, shortly before the election.
His monthly column will appear in the Bruce blog. B3
The past as prologue? Lining up for food and water, Louisville, Kentucky, 1937. By Margaret Bourke-White/Time & Life Pictures/Getty Images.
Reversal of Fortune
Describing how ideology, special-interest pressure, populist politics, and sheer incompetence have left the U.S. economy on life support, the author puts forth a clear, commonsense plan to reverse the Bush-era follies and regain America’s economic sanity.
by Joseph E. Stiglitz November 2008
When the American economy enters a downturn, you often hear the experts debating whether it is likely to be V-shaped (short and sharp) or U-shaped (longer but milder). Today, the American economy may be entering a downturn that is best described as L-shaped. It is in a very low place indeed, and likely to remain there for some time to come.
Virtually all the indicators look grim. Inflation is running at an annual rate of nearly 6 percent, its highest level in 17 years. Unemployment stands at 6 percent; there has been no net job growth in the private sector for almost a year. Housing prices have fallen faster than at any time in memory—in Florida and California, by 30 percent or more. Banks are reporting record losses, only months after their executives walked off with record bonuses as their reward. President Bush inherited a $128 billion budget surplus from Bill Clinton; this year the federal government announced the second-largest budget deficit ever reported. During the eight years of the Bush administration, the national debt has increased by more than 65 percent, to nearly $10 trillion (to which the debts of Freddie Mac and Fannie Mae should now be added, according to the Congressional Budget Office). Meanwhile, we are saddled with the cost of two wars. The price tag for the one in Iraq alone will, by my estimate, ultimately exceed $3 trillion.
Click here to continue reading Joseph E. Stiglitz’s article published in the November 2008 issue of Vanity Fair.