Stiglitz, who won the Nobel Prize in economics in 2001, weighs in on the stimulus and the recent tax cuts, claiming that . . .
. . . the trick would be to address several key economic inefficiencies. The first is that the defense budget has ballooned, so that we are spending an enormous amount overseas—where it doesn’t do anything for our economy—and on weapons with little use. The second is that we give subsidies to a wide range of businesses, which makes the market less efficient and is often in violation of our treaty obligations. The third is that we invest too little in the public goods like the infrastructure necessary for our economy to function. And the last inefficiency is that an increasingly large share—more than 20%—of our national income goes to the top 1% of earners, which means less money goes to the middle class—the real engine of economic growth.
So, Stiglitz says, the trick to reducing the deficit in a way that benefits the economy is simple:
• cut wasteful military spending, in part by no longer funding wars in Iraq and Afghanistan
• eliminate corporate subsidies, particularly to the banking, agricultural, and pharmaceutical sectors
• spend money on high-return public investments, increasing long-term economic growth
• increase the capital gains tax, which effectively allows the rich to pay a lower tax rate than the middle class
• raise taxes slightly on the rich—who can afford to pay more in taxes—effectively transferring more money back to the middle class