This is a tough article to understand. By the end of this course though, you should be able to get what he is driving at with more clarity. That is why you are taking this course. But if you do tackle it, hang in there, because midway there are a bunch of startling points that everyone should know and be able to understand. Challenge yourself. Also- you need to register with the NY Times for access to the regular items. I will never post any premium content (Times Select) articles, because I am too frugal to pay for the access.
3 comments:
So basically, we can no longer ignore the fact that we are borrowing 3 billion dollars a day, while China has a 500 million dollar daily surplus. There is a lot of political finger pointing in regards to the current trade imbalances, and the IMF has been very slow to act on anything, but the reality of the matter is that a very serious sitution is brewing. As Stiglitz says, the US Governement can't continue spending more than it brings in. I thought that his propsed solution was interesting, and the increased taxes on the rich while decreased on the poor is seemingly clashing with current government actions, but it does makes sense that in turn, such a tax plan could increase spending that would help heal the state of the US and Global economy. Stigiltz emphasizes the gravity of the situation, but I am still curious on who will take the first step?
Stiglitz does make some points that seem to be un-ignorable. The magnitude of our daily trade deficit, and the juxtaposition of it against China's booming surplus, is a scary thing to read about. Trade deficits sound and look scary, but in the long run are they really that bad of a thing? Didn't we have a huge trade deficit in the early '90's that disappeared almost overnight with the .com economic boom? He worries about people not saving enough, because that adds to the deficit, but isn’t it better to invest than to save? Investment creates growth, while saving does nothing besides retain a certain type of stability. Cutting expenditures would certainly help the deficit, as would cutting lower income taxes to increase spending and make up for the expenditure cuts. But raising upper income taxes, although an attractive option, seems like it would only stagnate growth. The richest people are the ones who need their money for investment and spending, things that create increasing growth. The greater percentage of their income that they retain, the more rich people will spend on goods and services that will help economic growth. They will disperse their money throughout the economy, and it will surely be a more efficient allocation of that money than government bureaucracies could hope to enact.
It seems that debating plans for policies that will help solve the problem is useless. No policy will be perfect, and none will be supported by most people. It seems like every possible policy has a major drawback, and if we try to use government to solve what we perceive as deficit problems, we will only end up gumming everything up. Would it be too risky to let the "problem" run its course? Let the global economy continue to grow and take its own direction, as the economies of such powerhouses as China and the U.S. will continue to grow and change. Each country will find its niche in the evolving world economy. Continued growth will solve deficit problems when Americans get their act together and start being productive in new ways that can be marketed to the world. Maybe this is a risky and un-responsible idea, but it seems to me that economic problems will tend to smooth themselves out as people strive for new ways to be successful.
Stiglitz does make some points that seem to be un-ignorable. The magnitude of our daily trade deficit, and the juxtaposition of it against China's booming surplus, is a scary thing to read about. Trade deficits sound and look scary, but in the long run are they really that bad of a thing? Didn't we have a huge trade deficit in the early '90's that disappeared almost overnight with the .com economic boom? He worries about people not saving enough, because that adds to the deficit, but isn’t it better to invest than to save? Investment creates growth, while saving does nothing besides retain a certain type of stability. Cutting expenditures would certainly help the deficit, as would cutting lower income taxes to increase spending and make up for the expenditure cuts. But raising upper income taxes, although an attractive option, seems like it would only stagnate growth. The richest people are the ones who need their money for investment and spending, things that create increasing growth. The greater percentage of their income that they retain, the more rich people will spend on goods and services that will help economic growth. They will disperse their money throughout the economy, and it will surely be a more efficient allocation of that money than government bureaucracies could hope to enact.
It seems that debating plans for policies that will help solve the problem is useless. No policy will be perfect, and none will be supported by most people. It seems like every possible policy has a major drawback, and if we try to use government to solve what we perceive as deficit problems, we will only end up gumming everything up. Would it be too risky to let the "problem" run its course? Let the global economy continue to grow and take its own direction, as the economies of such powerhouses as China and the U.S. will continue to grow and change. Each country will find its niche in the evolving world economy. Continued growth will solve deficit problems when Americans get their act together and start being productive in new ways that can be marketed to the world. Maybe this is a risky and un-responsible idea, but it seems to me that economic problems will tend to smooth themselves out as people strive for new ways to be successful.
Post a Comment