Friday, November 06, 2015

How to Fix the American Economy

                        
                                                           Comments due Nov. 13, 2015

In his new book, a Nobel laureate outlines how the huge disparity arose and the huge course correction needed to address it.  Stiglitz, a Nobel-prize winning economist, professor at Columbia University, and the chief economist at the Roosevelt Institute, asks the question “Can the rules of America’s economy be rewritten to benefit everyone—not just the wealthy?” The answer, he insists, is yes. Stiglitz describes the current situation as “ a stark picture of a world gone wrong” : He notes that 91 percent of all income growth between 2009 and 2012 was enjoyed by the wealthiest 1 percent of Americans. In the first half of the book, Stiglitz focuses on the practices and policies that have gotten the country to this point. It is a familiar story: The demise of labor unions, the increasing financialization of the economy, and the lack of wealth-building opportunities in minority communities have made the rich richer while leaving everyone else to flounder. He lists off a bevy of other contributors too: weak wages, ineffective regulation and federal oversight, and a focus on short-term versus long-term growth, which embodies a preference for rewarding shareholders over workers and consumers. Stiglitz also notes that despite advancements in technology, which should— in theory—increase efficiency and lower costs, consumers are paying more in fees for financial services, which enriches big banks and companies while siphoning money out of the middle class. All of these things, he says, have created a society with a gaping hole, not only in its economic makeup, but in its morality.

Stiglitz spends the latter portion of the book laying out how to fix things. Like his primer on how inequality came to be, the solutions cover everything from fiscal policy to corporate boardrooms to retirement savings. His overview doesn’t prioritize pragmatism: A solution that only involves overhauling the few things that everyone agrees need to be overhauled is no solution at all, he argues. Instead, he swings for the fences, suggesting a massive revision in the way the U.S. economy does business. First up is the attempt to tame what is called rent-seeking—the practice of increasing wealth by taking it from others rather than generating any actual economic activity. Lobbying, for example, allows large companies to spend money influencing laws and regulations in their favor, but lobbying itself isn’t helpful for the economy besides creating a small number of jobs in Washington; it produces nothing but helps an already rich and influential group grow more rich and more influential. Stiglitz suggests that reducing rent-seeking is critical to reining in inequality, especially when it comes to complex issues such as housing prices, patents, and the power that large corporations wield. To overhaul these behaviors and the policies that support it, Stiglitz says that America should give up what he deems the “incorrect and outdated” belief in supply-side economics, which grows from the premise that regulation and taxes dampen business opportunities and economic growth. Instead, massive changes to tax laws, regulations, and the financial sector are needed, he says, in order to curb rent-seeking. For instance, increasing tax rates, ending preferential treatment for top earners, and refining the tax code would decrease incentives to amass extreme amounts of wealth, since it would be so heavily taxed, and that tax would be difficult to shirk. Stiglitz suggests a 5 percent increase to the tax rate of the top 1 percent of earners—a move that he says would raise as much as $1.5 trillion over 10 years. He also calls for a “fair tax, ” which would eliminate preferential tax treatment for money earned from capital gains and dividends—perks enjoyed primarily by people who can afford to own a lot of stock. To further ensure that corporations, markets, and individuals aren’t pursuing profits at the expense of workers and the public, Stiglitz calls for a more active central bank. He accuses the Fed of being both too narrowly focused on macroeconomic indicators, and too deferential to the businesses and markets it has the ability to regulate. He wants the government to sponsor a homeownership agency that would dole out housing loans in a way that encourages buyers instead of developers and would closely monitor the market for fairness. Stiglitz ’s thoroughness is admirable, but his prescriptions can be overwhelming, given how much it would take to make each change. The agenda also includes emphasizing the goal of full employment rather than focusing on the sometimes reductive unemployment figures; investment in public infrastructure; better access to financial services, childcare, health care, and paid leave; and strengthened opportunities for collective bargaining. Oh, and better wages for workers, and more corporate transparency, too. Actually implementing all of these changes would require a complete shift in American policy and practice. The world that Stiglitz envisions in his book, one where all citizens can enjoy the promise of education, employment, housing, and a secure retirement seems at once like the realization of the American dream and an unattainable utopia.

14 comments:

Heather Kiczek said...

The first part of the article talks about the major gap in the economy. This "gap" is describing the wealth between the people living in the higher class versus the people living in the middle and lower class. According to the article, the demise of labor unions, the increasing financialization of the economy, and the lack of wealth-building opportunities have been the main causes for leaving the rich richer and the less wealthy in the dark. I think in order to improve the gap, I think that there needs to be more opportunity for the middle class to receive income, rather than the middle class constantly giving the fed their own money. The next part of the article is proposing possible solutions. In order to have a fully functional successful economy, full employment should be attained. Stinglitz believes that investing in public infrastructure, gaining better access to financial services, and strengthening collective bargaining, although will shift the whole economy, would improve the gap. I agree with Stieglitz because this is allowing the middle class to obtain a larger love lot income which will strengthen their position in the economy.

Nikolas Fountis said...

When there is a gap in an economy this shows that there is something or even many things going wrong. When you have the rich become richer and the poor become poorer the economy is going down the wrong path. This article speaks about this happening. The article also talks about how Stieglitz and what he thinks could be the solutions to fixing this problem. There is less opportunity for the middle class or lower class compared to the higher class. lets face it, now a days if you have money you have power. When a fair opportunity is given there should be a less of a gap for these middle class people and lower class people can gain this income which will correlate to the gap decreasing. Stieglitz also mentions that a more active central bank would benefit this economy for he believes the feds are " too narrowly focusing on macroeconomics" I agree with Stieglitz for I believe that with some of his ideas such as the central bank the gap between the rich and the poor will slowly but steadily decrease and that will benefit this economy.

-Nikolas Fountis

Anonymous said...

The article discusses the country's economic problem- the gap it has- and the author goes on to review what Stiglitz says is a solution. Stiglitz's solution covers things such as not going through with a Robin Hood plan of taking some money from the rich and redistributing it to the poor, but recreating the economy in such a way that the poor can become apart of the rich by their own means. The author goes on to talk about how "...Stiglitz [wants] a more active central bank." He then goes on to say that "[Stiglitz] accuses the Fed of being both too narrowly focused on macroeconomic indicators, and too deferential to the businesses and markets it has the ability to regulate." It definetly sounds like Stiglitz not only knows what he's talking about, but has a bone to pick with the way things currently are and knows how to get attention brought to his ideas.

-Elizabeth Piper Phillips

Alexandar Dimcevski said...

The American dream:"life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement" regardless of social class or circumstances of birth". The voices and minds not heard by society because of economic poverty is sad. But bear in mind the human nature aspect of this dream.
Personal greed is part of human nature no matter if you're rich or poor everyone is looking out for their own. Give a homeless guy 100$ and he will spend it for himself, give me 1000$ and I will use it for my personal gain, give a rich guy 1 M$ and he will use it. Neither of us are willing to share.

Anonymous said...

This article is very much related to the gap in the American Economy. What Americans believe what the poor, middle class, rich gap is very different than the actuality. The economies wealth is about half comes from the top 1% of the people. Shouldn't it be more divided with the rest of the classes? Yes, those people earned their money fair, and rightly, but everyone should have the income to survive and not be below the poverty line. How will this wealth be distributed? Well that is the million dollar question that no one really knows the answer to.

-Alexander Shields

Liam Monarchio said...

There are huge differences between the poor, middle, and upper classes. If we decide to re-write the rules of the united states to benefit everyone, than yes everyone will be doing better obviously but i do not believe that our economy would. I believe that our economy would just flat line and we would have a flat economy and it wouldn't rise because yes everyone will be having income increases but the amount of money that will be in the system will also increase and therefore everyone will all be living either lower middle class or maybe a little bit above that. i believe that our economy would not benefit from that at all.

Anonymous said...

After reading the title of the article "How To Fix The American Economy" I was very curious to see what the article had to say. The article discusses how when there is a gap in the economy many problems will occur. This specific gap is the gap between the rich and the poor. In the article economist Stiglitz suggests various solutions in order to resolve this economic gap. He says that recreating the economy to benefit all members of the economy is an option to fixing the economic gap. Stiglitz also suggests that having a more active bank could help resolve the problem as well. All in all Stiglitz would like to hopefully see a world where all members of society can enjoy all aspects of life and live the American Dream.
-Surina Sandhu

David Bavagnoli said...

Stiglitz's ideas are interesting and very ambitious. He says that his views are beneficial to everyone, but they mostly involve spreading the wealth and getting rid of the gap between rich and poor. When distributing the wealth, it's virtually impossible for everyone to benefit. There's no possible way that upper, middle, and lower class will all flourish with Stiglitz's policies. He wants to tax the rich by 5% more than they already are, and encourage people to stop "rent-seeking." However, the idea of a capitalist economy is that when businesses do things for the benefit of themselves, everyone else benefits as well. While Stiglitz's ideas are zealous, but it's unrealistic for everyone to thrive at the same time.

Anonymous said...

This article talks about the problem the economy has. Stiglitz books talks about a economy where everyone is equal where the rich aren't getting richer and where the poor aren't getting poorer. He talks about the way to solve this problem. From taxing those 1 percent high earner more and from taxing everyone equally. Though that seems like way to go the reality doesn't lie on what the government should but on what human beens and so cities want. We as humans beings are greed we only look out for own interest and not that of everyone. We each try to achieve our dreams and get to where we want to be in anyway possible and crushing anyone in our way. Though Stiglitz books seems like the key to utopia and the American dream none of it could work if we ourself put the effort in doing so. How can one be equal to everyone when greed is what consumes us and that's something that no government nor economist can change.

-Manuel Llivisaca

Anonymous said...

I don't think that Stiglitz's idea are anything out of left field. At the end of the article it says they all sound like the idea of the American Dream. Thats exactly what they are! Personally, I do not think that the stereotypical American Dream can ever be acquired. Stiglitz's ideas would be amazing but it would take away from personal gain, the reason people go to work everyday. People don't go through years of schooling to get an average job. They all are trying to strive for the highest level job and if everyone is recieveing a evenely distributed amount of wealth they will only wont to do the work that is worth that pay.

- Matthew Goden

prince unaegbu said...

This article talk about the problem us as American’s have now in our economy. In the beginning of the article it talked about the differences between people living in middle class, higher class, and higher class. It also talks about how the rich get richer and the poor get poorer. That is why our economy isn’t doing so well because we have things like that happening that doesn’t benefit America in no way shape or form. Stieglitz talks about a solution that can be made to fix this problem. He says S that a more active central bank would benefit this economy for he believes the feds is " too narrowly focusing on macroeconomics". In order to fix America’s economy we need to fix how we view things in this country.

Anonymous said...

This article discusses the gap in the United States economy. There are huge differences between the poor, middle and upper classes. The rich become richer and the poorer become poorer which steers the economy down the wrong path. More than half of the economies wealth comes from the top 1% of the American population. I believe everyone should have the same equal opportunity to earn a steady income to live above the poverty line.

-Jane Kasparian

Hamed Alharbi said...

The article talk about the troubles the American economy face, where people live in layers and the ones on top are not making it easy for the ones down there. it's really hard to move up because of the huge gap between them, each class is keeping their resources from the ones lower than them. Stiglitz's idea sounds just like the American dream, great if it happened but it will never will. why? well, because people all over the world not just the US are always looking for their own interest and since most of those people are from the 1% they will never give up what they already have. The government can't even risk forcing them since they can cause a mess with their resources or huge amount of money in the economy.

Anonymous said...

This article is really interesting, and it is something that I support without question. If 91 percent of growth over 3 years came only from the wealthiest 1 percent of the nation, they should be paying another tax since they have so much income. If they can manage to be in the top 1 percent of the richest people, I think that they can withstand paying a couple more thousand dollars each year. It would be really beneficial to the economy and help a bunch of people in lower class.

-Nick Arciszewski