From his Politico piece dated yesterday:
Monetary policy, one of the main instruments for managing the macro-economy, has proved ineffective — and will likely continue to be. It’s a delusion to think it can get us out of the mess it helped create. We need to admit it to ourselves.
. . .
But how do we get America back to work now? The best way is to use this opportunity — with remarkably low long-term interest rates — to make long-term investments that America so badly needs in infrastructure, technology and education.
We should focus on investments that both yield high returns and are labor intensive. These complement private investments — they increase private returns and so simultaneously encourage the private sector.
. . .
There are things we can do beyond the budget. The government should have some influence over the banks, particularly given the enormous debt they owe us for their rescue. Carrots and sticks can encourage more lending to small- and medium-sized businesses and to restructure more mortgages. It is inexcusable that we have done so little to help homeowners, and as long as the foreclosures continue apace, the real estate market will continue to be weak.
These are, basically, the points I’ve been trying to make in this space over the past couple of days.
Stiglitz also makes some points about taxes that I agree with. I believe we need more revenue – but I want to see that incremental revenue raised in ways that make the tax code more efficient. So I favor reducing or eliminating certain tax expenditures (subsidies in the tax code) and raising taxes on activities with significant negative externalities. I’d support a lower-rates-and-broaden-the-base approach to corporate tax reform. I’m not even constitutionally opposed to modest upper-bracket tax hikes; I just don’t think that’s the be-all and end-all of tax reform.
In my dream world, the conservative faction would recognize the need for more tax revenue, and would be fighting to make sure incremental revenue was raised by increasing rather than reducing the efficiency of the code. In my dream world, the conservative faction would recognize the need for more investment in public goods that will increase productivity over the long term, as well as more efforts to tackle unemployment directly, and would focus on fighting the capture of these investments by special interests and winning efficiency-improving givebacks in exchange for agreeing to increase, not cut, domestic discretionary spending. (Give more aid to the states to retain teachers – but only if the states get something back from the public sector unions on benefits. Spend a trillion dollars on essential infrastructure – but get a temporary suspension of Davis Bacon rules. You get my drift.)
But that’s not the world we live in. So I wind up agreeing more with Joseph Stiglitz, a left-wing critic of the Obama Administration, than with anyone in the conservative faction.
And for that, no doubt, I’ll be attacked from the left because I don’t think monetary policy can do much more to get us out of this mess. Another point on which I agree with Joseph Stiglitz.