Nobel Winner Stiglitz Calls for More Government Debt


Joseph Stiglitz, the 2001 Nobel Prize winner in Economics and a professor at Columbia University, offers a very controversial viewpoint in a recent interview with Henry Blodget: the U.S. government needs to borrow even more money for additional stimulus, and it needs to do so now. Warning against "deficit fetishism" that he sees sweeping through public sentiment, Stiglitz argues that additional spending could actually pay for itself over time if done prudently, and that concerns over deficits and debt levels are simply a new manifestation of the short-sightedness that led to our current problems.

The rationale Stiglitz presents leaves much to be desired, however. His main point seems to be that, at current levels and interest rates, the U.S. has no problem paying its debts -- which is true. But, in a stunningly quick reversal for someone who decried the short-term nature of financial markets in the same interview, Stiglitz breezily ignores recognizing projections that total deficits in the coming decade will amount to $9 trillion, nearly doubling the current national debt. This "minor" oversight is accomplished by arguing that targeted spending in education, technology and infrastructure will pay for itself if the government allocates the money correctly; thus, in the long-run, spending that returns about 6% annually will actually lower the total debt.