By Joseph E. Stiglitz
NEW YORK –
After a hard-fought election campaign, costing well in excess of $2 billion, it
seems to many observers that not much has changed in American politics: Barack
Obama is still President, the Republicans still control the House of
Representatives, and the Democrats still have a majority in the Senate. With
America facing a “fiscal cliff” – automatic tax increases and spending cuts at
the start of 2013 that will most likely drive the economy into recession unless
bipartisan agreement on an alternative fiscal path is reached – could there be
anything worse than continued political gridlock?
In fact, the
election had several salutary effects – beyond showing that unbridled corporate
spending could not buy an election, and that demographic changes in the United
States may doom Republican extremism. The Republicans’ explicit campaign of
disenfranchisement in some states – like Pennsylvania, where they tried to make
it more difficult for African-Americans and Latinos to register to vote –
backfired: those whose rights were threatened were motivated to turn out and
exercise them. In Massachusetts, Elizabeth Warren, a Harvard law professor and
tireless warrior for reforms to protect ordinary citizens from banks’ abusive
practices, won a seat in the Senate.
Some of Mitt
Romney’s advisers seemed taken aback by Obama’s victory: Wasn’t the election
supposed to be about economics? They were confident that Americans would forget
how the Republicans’ deregulatory zeal had brought the economy to the brink of
ruin, and that voters had not noticed how their intransigence in Congress had
prevented more effective policies from being pursued in the wake of the 2008
crisis. Voters, they assumed, would focus only on the current economic malaise.
The Republicans
should not have been caught off-guard by Americans’ interest in issues like
disenfranchisement and gender equality. While these issues strike at the core
of a country’s values – of what we mean by democracy and limits on government
intrusion into individuals’ lives – they are also economic issues. As I explain
in my book The Price of Inequality, much of the rise in US
economic inequality is attributable to a government in which the rich have
disproportionate influence –& and use that influence to entrench themselves.
Obviously, issues like reproductive rights and gay marriage have large economic
consequences as well.
In terms of
economic policy for the next four years, the main cause for post-election
celebration is that the US has avoided measures that would have pushed it
closer to recession, increased inequality, imposed further hardship on the
elderly, and impeded access to health care for millions of Americans.
Beyond that,
here is what Americans should hope for: a strong “jobs” bill –
based on investments in education, health care, technology, and infrastructure
– that would stimulate the economy, restore growth, reduce unemployment, and
generate tax revenues far in excess of its costs, thus improving the country’s
fiscal position. They might also hope for a housing program that finally
addresses America’s foreclosure crisis.
A comprehensive
program to increase economic opportunity and reduce inequality is also needed –
its goal being to remove, within the next decade, America’s distinction as the
advanced country with the highest inequality and the least social mobility.
This implies, among other things, a fair tax system that is more progressive
and eliminates the distortions and loopholes that allow speculators to pay
taxes at a lower effective rate than those who work for a living, and that
enable the rich to use the Cayman Islands to avoid paying their fair share.
America – and
the world – would also benefit from a US energy policy that reduces reliance on
imports not just by increasing domestic production, but also by cutting
consumption, and that recognizes the risks posed by global warming. Moreover,
America’s science and technology policy must reflect an understanding that
long-term increases in living standards depend upon productivity growth, which
reflects technological progress that assumes a solid foundation of basic
research.
Finally, the US
needs a financial system that serves all of society, rather than operating as
if it were an end in itself. That means that the system’s focus must shift from
speculative and proprietary trading to lending and job creation, which implies
reforms of financial-sector regulation, and of anti-trust and
corporate-governance laws, together with adequate enforcement to ensure that
markets do not become rigged casinos.
Globalization
has made all countries more interdependent, in turn requiring greater global
cooperation. We might hopethat America will show more leadership in reforming
the global financial system by advocating for stronger international
regulation, a global reserve system, and better ways to restructure sovereign
debt; in addressing global warming; in democratizing the international economic
institutions; and in providing assistance to poorer countries.
Americans
should hope for all of this, though I am not sanguine that they will get much
of it.& More likely, America will muddle through – here another little
program for struggling students and homeowners, there the end of the Bush tax
cuts for millionaires, but no wholesale tax reform, serious cutbacks in defense
spending, or significant progress on global warming.
With the euro
crisis likely to continue unabated, America’s continuing malaise does not bode
well for global growth. Even worse, in the absence of strong American
leadership, longstanding global problems – from climate change to urgently
needed reforms of the international monetary system – will continue to fester.
Nonetheless, we should be grateful: it is better to be standing still than it
is to be heading in the wrong direction.
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