Joseph Stiglitz has come out against further tax cuts in the United States, explaining that those tax cuts won’t do anything to stimulate investment, according to CNBC.Stiglitz’s view of the U.S. economy is that Americans have an “overhang” of debt and those with homes are paying for larger mortgages that their property is currently worth.
That situation doesn’t lead to tax cuts being spent, or creating investment in the U.S. economy, which Stiglitz views as the only way to grow the U.S.
Stiglitz is calling for a second, better designed, stimulus.
Like many others, Stiglitz seems to be agreeing with the assessment that the U.S. is in a balance sheet recession, and that consumers are focused on deleveraging, rather than spending. Any initiative intending to grow the broader economy through consumer spending will fail in this scenario. That’s because consumers are repairing their balance sheets (paying down debt) rather than spending.