Nobel-winning economist predicts Romney recession
Economist Joseph Stiglitz is hitting the media circuit to promote his new book. And as with any good book tour, he’s also throwing out a few political bombshells.
Primary example: Speaking to reporters in New York on Monday, the Nobel Prize-winner and former World Bank chief claimed that if former Massachusetts Governor Mitt Romney (R) is elected president in 2012, the risk of another recession will go up “significantly.”
“The Romney plan is going to slow down the economy, worsen the jobs deficit and significantly increase the likelihood of a recession,” he said, according to Bloomberg News.
Stiglitz went on to say that economic policies proposed by President Barack Obama and his challenger have “very big differences” because Obama views income inequality as a problem, whereas Romney does not.
Those two very different positions could mean the world to Americans in that Obama would attempt to address inequality with more progressive tax policies that levy higher rates on wealthy people, whereas Romney would accelerate inequality by lowering taxes on wealthy people and raising them on the poor.
Stiglitz’s characterization of Romney’s economic policies was recently supported by an analysis from The Center for Budget and Policy Priorities, which found that reduced taxes on wealthy Americans, major spending cuts to social safety net programs and increased defense spending would have a disastrous effect on lower-income Americans. That effect will be especially pronounced among those who rely upon Social Security, which would have to be cut 59 percent by 2022 under Romney’s policies.
In a recent interview with Vanity Fair, Stiglitz explained that Romney, like most Republicans, still adheres to the debunked principles of “trickle-down economics,” which he said encourages income inequality.
“[It] is based on the fallacy that inequality is good for economic growth, but again, the evidence is to the contrary,” he said. “Time and again, inequality has been shown to retard economic growth and promote instability. These are findings based on mainstream studies. Even the International Monetary Fund, not known for its radical economic stances, has come to recognize the adverse effects of inequality on economic performance.”
He added that income inequality also tends to encourage the most wealthy and influential to seek special protections from the government, which Stiglitz said has repeated itself throughout history. “Such rent-seeking behavior is a terribly inefficient use of resources: Rent-seekers don’t create value,” he said. “Rather, they use their privileged positions in markets to capture larger and larger portions of existing value. They distort the economy, lowering efficiency and economic growth.”
To begin addressing the problem of inequality, Stiglitz has recommended setting up “a fair tax system” that does not unfairly punish working people while giving the wealthy lower rates. President Obama has put several proposals on the table that would bring tax rates between the rich and poor more into line, but Republicans in Congress have consistently blocked progressive efforts to reform the tax code.
This video was broadcast by Bloomberg TV on Monday, June 4, 2012.
Photo: Screenshot via Bloomberg.com.